AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 7, 1997
REGISTRATION STATEMENT NO. 333-34429
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
DENTAL CARE ALLIANCE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
<TABLE>
<S> <C> <C>
DELAWARE 8741 65-0555-126
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
<TABLE>
<S> <C>
STEVEN R. MATZKIN, D.D.S.
CHIEF EXECUTIVE OFFICER
DENTAL CARE ALLIANCE, INC.
1343 MAIN STREET, 7TH FLOOR 1343 MAIN STREET, 7TH FLOOR
SARASOTA, FLORIDA 34236 SARASOTA, FLORIDA 34236
(941) 955-3150 (941) 955-3150
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
---------------
COPIES OF COMMUNICATIONS TO:
<TABLE>
<S> <C>
ROBERT L. GROSSMAN, ESQ. LESLIE E. DAVIS, ESQ.
GREENBERG TRAURIG HOFFMAN TESTA, HURWITZ & THIBEAULT, LLP
LIPOFF ROSEN & QUENTEL, P.A. HIGH STREET TOWER
1221 BRICKELL AVENUE 125 HIGH STREET
MIAMI, FLORIDA 33131 BOSTON, MASSACHUSETTS 02110
(305) 579-0500 (617) 248-7000
</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
of 1933, as amended (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, please 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------
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 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.
PROSPECTUS SUBJECT TO COMPLETION, DATED OCTOBER 7, 1997
2,000,000 SHARES
[LOGO]
COMMON STOCK
----------------
THE 2,000,000 SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE (THE
"COMMON STOCK"), OFFERED HEREBY ARE BEING ISSUED AND SOLD BY DENTAL CARE
ALLIANCE, INC. (THE "COMPANY"). PRIOR TO THIS OFFERING (THE "OFFERING"), THERE
HAS BEEN NO PUBLIC MARKET FOR THE COMMON STOCK OF THE COMPANY AND THERE CAN BE
NO ASSURANCE THAT AN ACTIVE TRADING MARKET WILL DEVELOP. IT IS CURRENTLY
ESTIMATED THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN $11.00 AND
$13.00 PER SHARE. SEE "UNDERWRITING" FOR INFORMATION RELATING TO THE FACTORS TO
BE CONSIDERED IN DETERMINING THE INITIAL PUBLIC OFFERING PRICE. THE COMPANY HAS
APPLIED FOR LISTING OF THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET UNDER THE
SYMBOL "DENT."
----------------
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share ...... $ $ $
Total(3) ...... $ $ $
</TABLE>
- --------------------------------------------------------------------------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. In addition, the Company has
paid The Nassau Group, Inc. ("Nassau") and related persons fees in the
amount of $79,587, will owe Nassau an additional $161,621 upon
consummation of the Offering and has issued or will issue to Nassau and
related persons shares of Common Stock and certain warrants to purchase
Common Stock. See "Principal and Selling Stockholders" and
"Underwriting."
(2) Before deducting estimated expenses of $1,100,000, which are payable by
the Company.
(3) The Selling Stockholders have granted the Underwriters a 30-day option
to purchase up to 300,000 additional shares of Common Stock on the same
terms and conditions as the securities offered by the Company hereby,
solely to cover over-allotments, if any. The Company will not receive
any proceeds from the sale of additional shares by the Selling
Stockholders. If such option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions and Proceeds to Selling
Stockholders will be $ , $ and $ , respectively. If any
Selling Stockholder defaults in its obligation under the Underwriting
Agreement to sell to the Underwriters any such additional shares, the
Company has agreed that it will issue and sell to the Underwriters an
equal number of shares of Common Stock. In such event, the total
Proceeds to the Company will increase by $11.16 (assuming an initial
public offering price of $12.00 per share) multiplied by the number of
such additional shares issued by the Company. See "Principal and
Selling Stockholders" and "Underwriting."
----------------
THE SHARES OF COMMON STOCK ARE OFFERED BY THE SEVERAL UNDERWRITERS NAMED
HEREIN, SUBJECT TO PRIOR SALE, WHEN, AS AND IF DELIVERED TO AND ACCEPTED BY
THEM, AND SUBJECT TO CERTAIN OTHER CONDITIONS INCLUDING THE RIGHT OF THE
UNDERWRITERS TO WITHDRAW, CANCEL, MODIFY OR REJECT ANY ORDER IN WHOLE OR IN
PART. IT IS EXPECTED THAT DELIVERY OF THE SHARES WILL BE MADE ON OR ABOUT
, 1997, AT THE OFFICES OF RAYMOND JAMES & ASSOCIATES, INC., ST.
PETERSBURG, FLORIDA.
RAYMOND JAMES & ASSOCIATES, INC. WILLIAM BLAIR & COMPANY
The date of this Prospectus is ______________, 1997
<PAGE>
[THE COMPANY'S STYLIZED LOGO . BELOW THE LOGO IS A MAP OF UNITED STATES
INCLUDING THE COMPANY'S LOGO AND LARGER SCALE DETAIL MAPS OF FLORIDA AND
MICHIGAN INDICATING THE LOCATIONS OF THE COMPANY'S OFFICES IN THOSE
STATES, WITH THE NAME OF EACH LOCATION SPECIFIED UNDER THE HEADINGS
"MICHIGAN MANAGED DENTAL CENTERS," "FLORIDA MANAGED DENTAL CENTERS" AND
"FLORIDA LICENSED DENTAL CENTERS." ALSO INCLUDED ARE PICTURES OF CERTAIN
MANAGED DENTAL CENTERS. BELOW THE MAP IS A CAPTION "MANAGED DENTAL
CENTERS PICTURED ARE MANAGED, BUT NOT OWNED, BY THE COMPANY."]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
--------------
THE COMPANY WILL FURNISH ITS STOCKHOLDERS WITH ANNUAL REPORTS CONTAINING
AUDITED FINANCIAL STATEMENTS CERTIFIED BY AN INDEPENDENT AUDITING FIRM AND
INTENDS TO DISTRIBUTE QUARTERLY REPORTS FOR THE FIRST THREE QUARTERS OF EACH
YEAR CONTAINING UNAUDITED FINANCIAL INFORMATION.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING NOTES THERETO
(THE "CONSOLIDATED FINANCIAL STATEMENTS"), APPEARING ELSEWHERE IN THIS
PROSPECTUS. DENTAL CARE ALLIANCE, INC. AND ITS SUBSIDIARIES (THE "COMPANY")
PROVIDES MANAGEMENT SERVICES TO DENTAL PRACTICES ("MANAGED DENTAL CENTERS") BY
ENTERING INTO ADMINISTRATIVE SERVICES AGREEMENTS (THE "MANAGEMENT AGREEMENTS")
WITH INDIVIDUAL DENTAL PROFESSIONAL CORPORATIONS OR PROFESSIONAL ASSOCIATIONS
(THE "PAS"). IN ADDITION, THE COMPANY PROVIDES LICENSING SERVICES TO MANAGED
DENTAL CENTERS AND CERTAIN NON-MANAGED PRACTICES (THE "LICENSED DENTAL CENTERS"
AND TOGETHER WITH THE MANAGED DENTAL CENTERS, THE "DENTAL CENTERS"). THE
GENERAL DENTAL AND SPECIALTY DENTAL PRACTITIONERS (SUCH AS ORTHODONTISTS,
PERIODONTISTS AND ORAL SURGEONS) WORKING AT THE MANAGED DENTAL CENTERS
("AFFILIATED DENTISTS") ARE EMPLOYED BY OR CONTRACT WITH THE PAS, WHICH ARE NOT
OWNED BY THE COMPANY. THE COMPANY DOES NOT EMPLOY AFFILIATED DENTISTS NOR DOES
IT CONTROL THE PRACTICE OF DENTISTRY. IMMEDIATELY PRIOR TO CONSUMMATION OF THIS
OFFERING, CERTAIN ASSETS AND LIABILITIES OF DENTAL CARE ALLIANCE, INC., WILL BE
CONTRIBUTED TO TWO WHOLLY-OWNED SUBSIDIARIES TO BE NAMED DENTAL CARE ALLIANCE
OF FLORIDA, INC. AND DENTAL CARE ALLIANCE OF MICHIGAN, INC. WHICH WILL BE
FORMED IMMEDIATELY PRIOR TO THE CONSUMMATION OF THIS OFFERING (THE
"CONTRIBUTION"). IN ADDITION, UNLESS OTHERWISE INDICATED, INFORMATION SET FORTH
IN THIS PROSPECTUS (I) ASSUMES THE CONSUMMATION OF THE CONTRIBUTION, (II)
ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION, (III) GIVES
EFFECT TO A 1-FOR-81.54 STOCK SPLIT TO BE EFFECTED PRIOR TO THE OFFERING (THE
"STOCK SPLIT") AND (IV) HAS BEEN ADJUSTED TO REFLECT THE MANDATORY CONVERSION
OF ALL OUTSTANDING SHARES OF THE COMPANY'S SERIES A PREFERRED STOCK INTO
654,359 SHARES OF COMMON STOCK (POST-STOCK SPLIT), UPON CONSUMMATION OF THE
OFFERING. INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER
THE HEADING "RISK FACTORS."
THE COMPANY
Dental Care Alliance, Inc. is a dental practice management company
providing management and licensing services to dental practices in Florida and
Michigan. The Company seeks to develop a significant market presence in each of
its markets by entering into Management Agreements with established dental
practices and by increasing revenues and operating income at the Managed Dental
Centers. The Company provides management and licensing services to 20 Managed
Dental Centers, 15 of which are located in Florida and five of which are
located in Michigan. Additionally, the Company provides only licensing services
to three Licensed Dental Centers in Florida. The Company's management services
include personnel, operational and financial services and its licensing
services include marketing, advertising and purchasing services.
The dental services industry in the United States is large and highly
fragmented. According to the Health Care Financing Administration ("HCFA"),
expenditures for all dental services were an estimated $45.8 billion in 1995
and are expected to reach $59.1 billion in 2000, representing a 5.2% compound
annual growth rate. The Company believes this anticipated growth is principally
due to an increase in availability of various types of dental insurance, an
increase in demand for dental services as the United States population ages, an
increase in demand for preventive and cosmetic dentistry and advances in dental
technology. According to the American Dental Association ("ADA"), in 1994
dental services in the United States were provided by approximately 153,000
dentists, 87.7% of whom practiced alone or with one other dentist. These solo
practitioners and small group practices have traditionally managed all aspects
of their dental practices, including the administrative, purchasing,
accounting, marketing, recruiting and business development functions.
The Company believes that recent trends in dental service reimbursement,
including the increased activity of third-party payors, are driving dentists to
form larger groups or contract with dental practice management companies. As
demand for dental services has increased, employers have sought to provide
dental benefits to employees at moderate incremental cost. These employers have
begun
3
<PAGE>
contracting with third-party payors who have added cost-effective dental
benefit programs to the services they provide. The programs offered include
various forms of dental care reimbursement, including traditional indemnity
insurance, preferred provider plans and capitated managed care plans. The
increased number and activity of third-party payors, particularly in the area
of managed care, has contributed to the complexity of managing dental
practices. In addition, the growing presence of third-party payors has put
increasing pressure on dental providers to contain costs. Due to the high fixed
costs inherent in the practice of dentistry, such cost containment pressures
will likely place solo practitioners and small group practices at a significant
disadvantage to larger group practices and practice management companies which
can spread their fixed costs over a larger base of dentists and have greater
negotiating leverage with health maintenance organizations ("HMOs").
The Company believes it is well-positioned to capitalize on the recent
trends driving dental provider consolidation. Dr. Steven R. Matzkin, the
Company's Chairman of the Board, President and Chief Executive Officer, has
invested over 13 years developing a flexible and analytically driven management
approach. This management approach is flexible in that it can be applied to a
wide variety of dental practices, including urban, suburban, start-up, mature,
fee-for-service and managed care practices and addresses particular
inefficiencies at each Managed Dental Center. The Company's management approach
is analytically driven in that it compares certain financial and operational
data for each Managed Dental Center with targeted parameters to quickly
evaluate areas for improvement. The Company uses this management approach to
design and implement an integrated marketing, staffing and scheduling program
to address the specific needs of each of its Managed Dental Centers. These
programs are designed to: (i) focus the Affiliated Dentists and hygienists on
the provision of high quality dental care; (ii) maximize revenue per Managed
Dental Center through the implementation of marketing, case presentation,
public relations and patient-calling programs; (iii) increase market share by
recruiting local dental specialists (such as orthodontists, periodontists and
oral surgeons) to be employed at the Managed Dental Centers, thereby increasing
total revenue per Managed Dental Center and precluding the need to refer
certain types of dental procedures to third parties outside of the Company's
network; and (iv) increase the capacity for patient flow through incremental
efficiencies, training, and if necessary, facility expansion. The Company also
uses its management approach to customize an external expansion strategy to the
characteristics of each existing and targeted new market.
The Company's objective is to become a leading dental practice management
company in each of its target markets. To achieve this objective the Company
seeks to grow rapidly through a combination of internal growth and external
expansion. The key elements of its internal growth strategy are to: (i)
increase revenues and operating income at Managed Dental Centers primarily
through the implementation of customized marketing and productivity improvement
programs and the integration of specialty service providers into its network,
(ii) facilitate long-term patient relationships by stressing professionalism
and the provision of high quality care and (iii) recommend adjustments to the
third-party payor mix at each Managed Dental Center to maximize productivity
and respond to local market conditions. The key elements of its external
expansion strategy are to: (i) identify potential Managed Dental Centers which
have the necessary characteristics to excel in their specific local market,
(ii) increase market share in current markets by entering into Management
Agreements with additional high quality dental practices and (iii) expand into
new markets by entering into Management Agreements with well-established
practices that can serve as platforms for further expansion.
RECENT DEVELOPMENTS
In April 1997 the Company purchased the non-dental assets of, and entered
into a Management Agreement with respect to, a dental practice in Tampa,
Florida. This practice employs one dentist and two dental hygienists, and
reported revenue for the fiscal year ended December 31, 1996 of approximately
$950,000. In July 1997, the Company entered into a Management Agreement with
respect to four dental practices located in the Detroit, Michigan area. These
practices employ six dentists and two
4
<PAGE>
dental hygienists and reported aggregate revenue for the fiscal year ended
December 31, 1996 of approximately $3.4 million. In July 1997, the Company also
entered into a Management Agreement with respect to a dental practice in Flint,
Michigan. This practice employs seven dentists and 14 dental hygienists, and
reported revenue for the fiscal year ended December 31, 1996 of approximately
$4.0 million. In August 1997, the Company purchased the non-dental assets of,
and entered into a Management Agreement with respect to, a dental practice
located in Tallahassee, Florida. This practice employs one dentist and two
dental hygienists and reported revenue for the fiscal year ended December 31,
1996 of approximately $900,000. In September 1997, the Company purchased the
non-dental assets of, and entered into a Management Agreement with respect to,
a dental practice in St. Petersburg, Florida. This practice employs one dentist
and one dental hygienist and reported revenue for the fiscal year ended
December 31, 1996 of approximately $400,000. The Company intends for the
Detroit area, Flint and Tallahassee dental practices to be platform practices
for further expansion in their respective markets. In addition, the owners of
certain PAs with which the Company has Management Agreements have executed
non-binding letters of intent to acquire ten dental practices employing 50
dentists, many of whom are part-time, and 23 dental hygienists, which practices
reported aggregate revenue for their respective last full fiscal years of
approximately $10.0 million. If such transactions are consummated, the
acquiring PAs are expected to enter into Management Agreements with the
Company. There can be no assurance that the Company will enter into Management
Agreements with respect to such practices or that any such practices will be
integrated successfully into the Company's network. See "Risk Factors--Risks
Associated with Expansion Strategy," "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Certain Transactions."
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company ......... 2,000,000 shares
Common Stock to be outstanding
after the Offering ........................... 6,897,700 shares(1)
Use of proceeds .............................. To lend money to PAs to finance the purchase of
assets of additional dental practices, to acquire
the non-dental assets of additional dental practices,
to provide working capital and for general corporate
purposes. The Company may use a portion of the proceeds
to purchase businesses complimentary to the business
of the Company. See "Use of Proceeds," "The Company"
and "Certain Transactions."
Proposed Nasdaq National Market symbol ........ DENT
</TABLE>
- ----------------
(1) Does not include (i) an aggregate of 250,000 shares of Common Stock
reserved for issuance under the Company's Omnibus Executive Incentive
Compensation Plan (the "Omnibus Plan"), of which options for approximately
66,000 shares will be granted upon consummation of this Offering at a per
share exercise price equal to the public offering price per share, (ii) an
aggregate of 425,000 shares of Common Stock reserved for issuance under
the Company's 1997 Non-Qualified Stock Option Plan (the "Non-Qualified
Plan"), of which options to purchase approximately 135,000 shares will be
granted upon consummation of the Offering at a per share exercise price
equal to the public offering price per share, (iii) 53,001 shares of
Common Stock to be reserved for issuance (assuming an initial public
offering price of $12.00 per share) pursuant to warrants to be issued upon
consummation of the Offering at a weighted average exercise price equal to
$1.74 per share, (iv) 49,576 shares of Common Stock reserved for issuance
pursuant to outstanding options to purchase Common Stock at a weighted
average exercise price of $1.53 per share and (v) options to purchase
17,771 shares (assuming an initial public offering price of $12.00 per
share) at the initial public offering price. See "Management--Omnibus
Executive Incentive Compensation Plan", "--Non Qualified Stock Option
Plan" and "Description of Capital Stock--Warrants and Options to Purchase
Common Stock."
5
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------------------- ----------------------------
1994 1995 1996 1996 1997
------------ ------------- ------------- ------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA (1):
Management fees .................................... $ 673,304 $ 513,705 $1,289,828 $ 405,072 $2,471,759
Consulting and licensing fees ........................ 42,763 262,769 347,600 138,812 161,885
----------- ---------- ---------- ---------- ----------
Total revenues .................................... 716,067 776,474 1,637,428 543,884 2,633,644
----------- ---------- ---------- ---------- ----------
Managed dental center expenses:
Staff salaries and benefits ........................ -- -- 233,657 -- 601,383
Dental supplies .................................... -- -- 79,448 -- 213,334
Laboratory fees .................................... 98,222 373,010
Marketing .......................................... -- -- 38,128 -- 176,627
Occupancy .......................................... -- -- 106,501 -- 333,085
Other ............................................. -- -- 57,182 -- 326,494
----------- ---------- ---------- ---------- ----------
Total managed dental center expenses ............ -- -- 603,138 -- 2,023,933
----------- ---------- ---------- ---------- ----------
716,067 776,474 1,034,290 543,884 609,711
Salaries and benefits .............................. 408,716 400,669 521,683 261,642 373,016
General and administrative ........................... 204,901 234,577 260,558 118,476 135,970
Advisory services(2) ................................. -- 127,768 -- -- --
Depreciation and amortization ........................ 15,150 22,106 27,654 10,254 41,578
----------- ---------- ---------- ---------- ----------
Operating income (loss) ........................... 87,300 (8,646) 224,395 153,512 59,147
Interest income (expense), net ..................... 22,584 6,494 20,781 (5,058) 36,464
----------- ---------- ---------- ---------- ----------
Income (loss) before income taxes and
minority interest .............................. 109,884 (2,152) 245,176 148,454 95,611
Provision for income taxes ........................... 19,919 -- 35,500 -- 36,000
Minority interest .................................... 2,440 8,654 7,674 3,537 --
----------- ---------- ---------- ---------- ----------
Net income (loss) ................................. 87,525 (10,806) 202,002 144,917 59,611
Adjustment to redemption value of common
and preferred securities ........................ 39,951 85,709 (191,237) -- (10,500)
Cumulative preferred stock dividend ............... -- -- (6,485) -- (60,000)
----------- ---------- ---------- ---------- ----------
Net income (loss) applicable to common stock . $ 127,476 $ 74,903 $ 4,280 $ 144,917 $ (10,889)
=========== ========== ========== ========== ==========
Unaudited pro forma data(3):
Income (loss) before income taxes and
minority interest .............................. $ 109,884 $ (2,152) $ 245,176 $ 148,454 $ 95,611
Pro forma provision for income taxes ............... 42,000 -- 94,000 57,000 36,000
Minority interest in consolidated subsidiaries . 1,507 5,343 4,739 2,184 --
----------- ---------- ---------- ---------- ----------
Pro forma net income (loss) ........................ $ 66,377 $ (7,495) $ 146,437 $ 89,270 $ 59,611
=========== ========== ========== ========== ==========
Pro forma net income per common share ............... $ .03 $ .01
========== ==========
Weighted average common shares outstanding ......... 4,773,071 4,773,071
MANAGED DENTAL CENTER DATA:
Number of Managed Dental Centers(4) ............... 7 9 12 13 13
Net patient revenue at Managed
Dental Centers(5) ................................. $3,703,430 $4,515,019 $5,576,059 $2,669,892 $3,529,242
Number of Affiliated Dentists(6) ..................... 10 12 17 17 18
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------------
PRO FORMA
ACTUAL AS ADJUSTED (7)
------------ ----------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital .................................... $ 851,382 $22,071,382
Total assets ....................................... 3,370,468 24,590,468
Long-term debt, including current maturities ...... 190,553 190,553
Redeemable common and preferred securities ......... 1,664,299 --
Stockholders' equity .............................. 641,516 23,525,815
</TABLE>
- ----------------
(1) Effective October 1996, the Company revised the terms of all of its 12 then
existing Management Agreements such that the Company is responsible for
the payment of all non-professional expenses of the Managed Dental
Centers. Ten Management Agreements were also revised to base the Company's
management fee from a percentage of net profits at each PA to a percentage
of net patient revenues from each PA. Accordingly, prior to these
revisions to such 12 Management Agreements, all non-professional expenses
of the Managed Dental Centers and related revenues were reflected in each
PA's financial statements. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(2) Represents non-cash charges for warrants issued in consideration for
certain financial advisory services.
(3) Pro forma adjusted to reflect a 38% income tax rate as if the Company was
taxed as a C Corporation prior to October 25, 1996, when the Company was
reorganized from Limited Liability Corporation status to C Corporation
status. See Notes 2 and 7 of Notes to Consolidated Financial Statements.
(4) Presented as of the end of the period.
(5) Net patient revenue is the total amount of revenue recorded by the PAs
during the period. Revenue is included from and after the date on which
the relevant PA executed a Management Agreement with the Company.
(6) Presented as of the end of the period. Affiliated Dentists include both
full-time and part-time Affiliated Dentists but exclude Dental Directors.
See "Business--Dental Directors."
(7) Adjusted to give pro forma effect to the conversion of mandatorily
redeemable preferred stock to Common Stock and to the termination of put
rights associated with certain Common Stock, and adjusted for the sale of
2,000,000 shares of Common Stock offered by the Company hereby at an
assumed public offering price of $12.00 per share and the application of
the estimated net proceeds therefrom. See "Use of Proceeds" and
"Capitalization."
ALL REFERENCES IN THIS PROSPECTUS TO INDUSTRY FINANCIAL AND STATISTICAL
INFORMATION ARE BASED ON TRADE ARTICLES AND INDUSTRY REPORTS THAT THE COMPANY
BELIEVES TO BE RELIABLE AND REPRESENTATIVE OF THE DENTAL SERVICES INDUSTRY AT
THE DATE OF THIS PROSPECTUS, ALTHOUGH NO ASSURANCE TO THAT EFFECT CAN BE GIVEN.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN SUCH FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS,
INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS
PROSPECTUS.
7
<PAGE>
RISK FACTORS
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK, INCLUDING THE
RISKS DESCRIBED BELOW. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE
SPECIFIC FACTORS SET FORTH BELOW, AS WELL AS THE OTHER INFORMATION CONTAINED IN
THIS PROSPECTUS, BEFORE DECIDING TO INVEST IN THE COMMON STOCK OFFERED HEREBY.
THE FOLLOWING DISCUSSION IDENTIFIES IMPORTANT CAUTIONARY FACTORS THAT COULD
CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED IN
FORWARD LOOKING STATEMENTS OF THE COMPANY APPEARING IN THIS PROSPECTUS OR
OTHERWISE MADE BY, OR ON BEHALF OF, THE COMPANY. IN PARTICULAR, SUCH FORWARD-
LOOKING STATEMENTS, INCLUDING THOSE REGARDING THE ADDITION OF MANAGED DENTAL
CENTERS, EXPANSION WITHIN EXISTING AND INTO NEW MARKETS, THE ADEQUACY OF THE
COMPANY'S CAPITAL RESOURCES, THE FUTURE PROFITABILITY OF MANAGED DENTAL CENTERS
AND OTHER STATEMENTS REGARDING TRENDS RELATING TO, AND THE COMPANY'S ABILITY TO
IMPROVE, VARIOUS REVENUE AND EXPENSE ITEMS, COULD BE AFFECTED BY A NUMBER OF
RISKS AND UNCERTAINTIES, INCLUDING THOSE DESCRIBED BELOW.
RISKS ASSOCIATED WITH EXPANSION STRATEGY. The Company is party to
Management Agreements with PAs that own 20 Managed Dental Centers. The Company
intends to continue to expand its existing Managed Dental Centers and to enter
into Management Agreements with PAs that own additional dental centers. The
ultimate success of the Company's expansion strategy will depend on factors
which include the following:
ABILITY TO IDENTIFY AND ENTER INTO MANAGEMENT AGREEMENTS WITH SUITABLE
DENTAL PRACTICES. The Company intends to continue to devote a substantial
amount of time and resources to identifying suitable dental practices and
to negotiating Management Agreements with such practices. Identifying
suitable dental practices and negotiating Management Agreements with such
practices can be a lengthy and costly process. There can be no assurance
that the Company will be able to identify suitable Managed Dental Center
candidates, or that Management Agreements will be entered into with respect
to such candidates on terms favorable to and within time frames desired by
the Company, or at all. In the event that the execution of a planned
Management Agreement fails to occur or is delayed, the Company's quarterly
financial results may be materially lower than financial analysts'
expectations, which likely would cause a decline, perhaps substantial, in
the market price of the Common Stock. The foregoing factors could have a
material adverse effect on the Company's results of operations or financial
condition and the Company's ability to continue its expansion strategy.
Moreover, in connection with entering into such Management Agreements, the
Company may be required to incur indebtedness or assume other liabilities
which could have a material adverse effect on the Company's operating
results, liquidity and capital resources, or may cause the Company to issue
shares of its capital stock which could result in dilution to stockholders.
INTEGRATION OF DENTAL PRACTICES. The integration of Managed Dental
Centers into the Company's network is a difficult, costly and time
consuming process which, among other things, requires the Company to
attract and retain competent and experienced management and administrative
personnel and to implement and integrate reporting and tracking systems,
management information systems and other operating systems. In addition,
such integration may require, among other things, the opening of new
facilities or the expansion of existing facilities, the expansion of
accounting controls and procedures and the elimination of duplicate
personnel. There can be no assurance that substantial unanticipated
problems, costs or delays associated with such integration efforts or with
such Managed Dental Centers will not arise or continue. Any such problems,
costs or delays could cause the Company's financial results in fiscal
quarters including and subsequent to the execution of the relevant
Management Agreements to be materially lower than financial analysts'
expectations, which likely would cause a decline, perhaps substantial, in
the market price of the Common Stock. In particular, the Company's expenses
related to any new Managed Dental Center may exceed the revenues it
realizes from such Managed Dental Center and, accordingly, the integration
of such Managed Dental Center may have a temporary or sustained negative
impact on the Company's
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results of operations or financial condition. As the Company pursues its
expansion strategy, there can be no assurance that the Company will be able
to successfully integrate new Managed Dental Centers in a timely manner or
at all, or that any new Managed Dental Center will have a positive impact
on the Company's results of operations and financial condition.
MANAGEMENT OF ADDITIONAL DENTAL CENTERS. The success of the Company's
expansion strategy will depend in part on the Company's ability to
effectively manage an increasing number of Managed Dental Centers, some of
which are expected to be located in markets geographically distant from
markets in which the Company presently operates. The addition of Managed
Dental Centers may impair the Company's ability to efficiently and
successfully provide management services to existing Managed Dental Centers
and to manage and supervise adequately the Company's employees. The Company
has no experience in managing more than 20 Managed Dental Centers, and the
Company's results of operations and financial condition could be materially
adversely affected if it is unable to do so effectively.
AVAILABILITY OF FUNDS FOR EXPANSION STRATEGY. The Company's expansion
strategy will require that substantial capital investment and adequate
financing be available to the Company. Capital is needed for (i) loans to
PAs to purchase the dental assets of dental practices, (ii) the acquisition
by the Company of the non-dental assets of dental practices, (iii) the
integration of operations of dental practices and (iv) the purchase of
additional equipment and technology. The Company believes that the net
proceeds from this Offering, cash flow from operations and borrowings
available under the Company's existing credit facility will be adequate to
meet the Company's anticipated capital needs through 1998, although there
can be no assurance to that effect. After 1998, the Company may be required
to obtain financing through additional borrowings or the issuance of
additional equity or debt securities. There can be no assurance that the
Company will be able to obtain such financing or that, if available, such
financing will be on terms acceptable to the Company. Any inability of the
Company to obtain suitable financing could cause the Company to limit or
otherwise modify its expansion strategy, which could have a material
adverse effect on the Company's results of operations and financial
condition.
ABILITY TO INCREASE REVENUES AND OPERATING INCOME OF MANAGED DENTAL
CENTERS. A key element of the Company's internal growth strategy is to
increase revenues and operating income at the Managed Dental Centers. There
can be no assurance that the Company's revenues and operating income from
new Managed Dental Centers will improve at rates comparable to the
historical improvement rates experienced by the Company's existing Managed
Dental Centers or at all, or that revenues or operating income from
existing Managed Dental Centers will continue to improve at such historical
rates or at all. Any failure by the Company in improving revenues or
operating income at its Managed Dental Centers could have a material
adverse effect on the Company's results of operations and financial
condition.
DEPENDENCE ON MANAGEMENT AGREEMENTS, THE PAS AND AFFILIATED DENTISTS. The
Company receives fees for services provided to the PAs under the Management
Agreements based on 74% of the net patient revenue under most of its Management
Agreements and between 50% and 55% of the net profit under its other Management
Agreements. The Company's revenue is dependent on revenue generated by the PAs
and, in some cases, net profits and, therefore, effective and continued
performance of the PAs during the terms of the Management Agreements is
essential to the Company's long term success. In any PA, the loss of an
Affiliated Dentist, dental hygienist or a long-term employee, or the inability
of the PA to attract and retain Dental Directors, could have a material adverse
effect on the revenues of the PAs and the Company. In particular, Dr. Dennis A.
Corona owns 13 of the PAs, and any conflicts, or impairment of the Company's
relationship, with Dr. Corona could have a material adverse effect on the
Company. In addition, the Company is a party to only 20 Management Agreements
and, accordingly, the expiration or termination of one or more Management
Agreements could have a material adverse effect on the revenues of the Company.
For example, it is anticipated that
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the Managed Dental Center in Flint, Michigan, will contribute in excess of 10%
of the Company's aggregate revenue in 1997 and may contribute in excess of 10%
in 1998. Further, the PA located in Port Charlotte, Florida, has the right to
terminate its Management Agreement during a 90-day period beginning in October
1998. Such Managed Dental Center contributed approximately 18% and 14% to the
Company's revenues in 1996 and for the six months ended June 30, 1997,
respectively. Each of this Management Agreement and the Management Agreement
with respect to the Managed Dental Center located in Kissimmee, Florida expires
in 2003. In addition, the Management Agreement with respect to the four Detroit
area practices expires in 2005. Any material loss of revenue by any of the PAs
or the expiration or termination of any of the Management Agreements could have
a material adverse effect on the Company's business, financial condition and
results of operations. In the event of breaches of the Management Agreements by
any of the PAs, there can be no assurance that the legal remedies available to
the Company will be adequate to compensate the Company for its damages
resulting from such breaches. See "Business-Management Agreements."
GOVERNMENTAL REGULATION. Business arrangements between dentists and
business corporations that provide dental practice management services are
regulated extensively at the state and federal levels, including regulation in
the following areas:
CORPORATE PRACTICE OF DENTISTRY. The laws of many states prohibit
corporations that are not owned entirely by dentists from employing
dentists (and in some states, dental hygienists and dental assistants),
having control over clinical decision-making, or engaging in other
activities that are deemed to constitute the practice of dentistry. Florida
law specifically prohibits non-professional for-profit corporations from
employing dentists and dental hygienists, exercising control over patient
records, and making decisions relating to clinical matters, office
personnel, hours of practice, pricing, credit, refunds, warranties and
advertising. Michigan law imposes similar restrictions on the practice of
dentistry by non-professional corporations.
Most states, including Florida and Michigan, also prohibit
non-professional for-profit corporations from owning, maintaining or
operating an office for the practice of dentistry. These laws have
generally been construed to permit arrangements under which the dentists
are not employed by or otherwise controlled as to clinical matters by the
party supplying facilities and non-professional services. Both Florida and
Michigan law require that dentists or their professional corporations
maintain complete care, custody and control of all equipment and materials
used in the practice of dentistry.
FEE-SPLITTING AND ANTI-KICKBACK LAWS. Many states also prohibit
"fee-splitting" by dentists with any party except other dentists in the
same professional corporation or practice entity. In most cases, these laws
have been construed as applying to the practice of paying a portion of a
fee to another person for referring a patient or otherwise generating
business, and not to prohibit payment of reasonable compensation for
facilities and services (other than the generation of referrals), even if
the payment is based on a percentage of the practice's revenues. The
Florida and Michigan fee-splitting laws prohibit paying or receiving any
commission, bonus, kickback, or rebate, or engaging in any split-fee
arrangement in any form with a dentist for patient referrals to dentists or
other providers of health care goods and services.
In addition, most states 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. Such
laws would be violated and the Company could be materially adversely
affected if the Affiliated Dentists make referrals to entities that are
related to the Company or its owners for the purpose of securing, directly
or indirectly, payment or other remuneration. Federal law also prohibits
the offer, payment, solicitation or receipt of any form of remuneration in
return for the referral of patients covered by federally funded health care
programs such as Medicaid, or in return for purchasing, leasing, ordering
or arranging for the purchase, lease or order of any item or service that
is covered by a federal program.
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ADVERTISING RESTRICTIONS. Many states, including Florida and Michigan,
prohibit dentists from using, except in limited circumstances, advertising
which includes any name other than their own, or from advertising in any
manner that is likely to lead a person to believe that a nondentist is
engaged in the practice of dentistry. Florida law also requires all
advertising to identify the dentist who assumes total responsibility for
the advertisement and may not include the name of a person who is neither
actually involved in the practice of dentistry at the advertised location
nor an owner of the practice being advertised. In addition, Michigan and
Florida law impose additional restrictions on advertisements by
specialists. Similarly, Michigan law requires that the name of each dentist
performing services at a location be clearly disclosed by sign or lettering
at such location.
LIMITATIONS ON DELEGATION. Some states, including Florida and Michigan,
regulate the manner in which dentists delegate certain tasks to
nondentists.
The laws described above provide for civil and criminal penalties for
their violation. These laws have been subject to limited judicial and
regulatory interpretation. They are enforced by regulatory agencies that are
vested with broad discretion in interpreting their meaning. The Company's
agreements and activities have not been examined by federal or state
authorities under these laws and regulations. For these reasons, there can be
no assurance that a review of the Company's business arrangements or the
operation of the Managed Dental Centers will not result in determinations that
would adversely affect the Company's operations or that the Management
Agreements or certain of their provisions will be held valid and enforceable.
In addition, these laws and their interpretation vary from state to state. The
laws and regulations of certain states into which the Company seeks to expand
may require the Company to change the form of relationships entered into with
dentists in a manner that restricts the Company's operations in those states.
See "Business-Governmental Regulation."
NON-COMPETITION COVENANTS. The Management Agreements generally require
each PA to use its best efforts to enter into employment agreements with the
Affiliated Dentists, which agreements include covenants not to compete with the
PA within a specified geographic area (generally from one to five miles) for a
period of from one to three years after termination of employment. In most
states, including Florida and Michigan, 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. For this reason, it is
uncertain whether a court will enforce such a covenant in a given situation. In
addition, there is little judicial authority regarding whether a management
company's interest under a management agreement will be viewed as the type of
protectable business interest that would permit it to enforce such a covenant
or to require a PA to enforce such covenants against the Affiliated Dentists.
Since the intangible value of a Management Agreement depends primarily on the
ability of the PA to preserve its business, which could be harmed if Affiliated
Dentists went into competition with the PA, a determination that these
provisions are unenforceable could have a material adverse effect on the
Company. See "Business-Management Agreements."
COMPETITION. The dental practice management segment of the dental services
industry is highly competitive and is expected to become increasingly
competitive. The Company currently competes with other dental practice
management companies in its existing markets, including Coast Dental Services,
Inc. in Florida. There are also a number of dental practice management
companies currently operating in other parts of the country which may enter the
Company's existing markets in the future. Many of such competitors and
potential competitors have substantially greater financial resources than the
Company, have established large dental practice networks or otherwise enjoy
competitive advantages which may make it difficult for the Company to compete
against them or enter into additional Management Agreements on terms acceptable
to the Company. In addition, as the Company seeks to expand its operations into
new markets, it is likely to face competition from dental practice management
companies which already have established a strong presence in such markets.
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The business of providing dental services is highly competitive in each of
the markets in which the Managed Dental Centers operate or in which operations
are contemplated. The Affiliated Dentists compete with other dentists who
maintain single or satellite offices, as well as with dentists who maintain
group practices, operate in multiple offices or are members of competing dental
practice management networks. Many of these dentists have established practices
and reputations in their markets. In addition to competing against established
practices for patients, the Managed Dental Centers compete with such practices
in the retention and recruitment of general dentists, specialists and
hygienists to staff the Managed Dental Centers. If the availability of dentists
begins to decline in the Company's existing or targeted markets, it may become
increasingly difficult to attract and retain the dental professionals to staff
such sites. There can be no assurance that the Managed Dental Centers will be
able to compete effectively with such other practices. See
"Business-Competition."
POTENTIAL CONFLICTS OF INTEREST OF THE COMPANY'S PRESIDENT RELATING TO THE
PAS. Profit Dental Management Corp. ("Profit"), an entity controlled by Dr.
Matzkin, receives consulting fees from PAs in Michigan relating to the four
Detroit-area practices to which the Company provides management services, as
well as payments on a note relating to the sale of these practices by Dr.
Matzkin in 1993 (the "Note"). Consulting payments and payments under the Note
aggregate $216,000 per year and will continue through 2005. The Company is
currently considering the acquisition of the capital stock of Profit. It is
anticipated that such acquisition will not happen prior to 1998 and will be
consummated only upon approval of the outside members of the Board of
Directors. Dr. Matzkin and/or his affiliates also (i) own some of the dental
laboratories that perform laboratory services for the Affiliated Dentists and
(ii) are the lessors under real property and/or capital equipment leases with
certain of the PAs. In 1996, the amount paid by the Managed Dental Centers to
such laboratories was $145,000, of which $60,000 was advanced by the Company
and remains outstanding at December 31, 1996. In 1996, the amount paid by
Managed Dental Centers for leases was $218,000. As a result of the foregoing,
potential conflicts of interest may arise in certain matters including, but not
limited to, matters related to applicable Management Agreements between the
Company and Dr. Matzkin and/or the PAs and Dr. Matzkin. There can be no
assurances that the Company will not be adversely affected by matters in which
Dr. Matzkin and his affiliates have potential conflicts of interest. The
Company believes, however, that all transactions between Dr. Matzkin and his
affiliates, on the one hand, and the Company and the PAs, on the other hand,
are fair to the Company and the PAs and on terms no less favorable to the
Company and the PAs than would have been reached through arm's-length
negotiations with unrelated third parties. See "Risk Factors--Fee Splitting and
Anti-Kickback Laws," "Business-Management Agreements" and "Certain
Transactions."
RISKS ASSOCIATED WITH NOTES FROM AND ADVANCES TO PAS. The Company has made
and intends to continue to make loans to PAs to finance the purchase of the
dental assets of Managed Dental Centers. These loans are evidenced by notes and
secured by the dental assets of such Managed Dental Centers, some of which are
intangible and not readily convertible into cash, and are personally guaranteed
by the Affiliated Dentists who own the PAs. Such loans are recorded on the
Company's balance sheet as "Notes Receivable from PAs" until repaid. At
December 31, 1996 and June 30, 1997, Notes Receivable from PAs were $198,395
and $173,756, respectively. Management believes that such loans will increase
in the future as the Company expands its network of Managed Dental Centers. In
addition, in the event that the percentage of revenue retained by any PA is not
sufficient to pay its expenses, as is often the case with newly integrated
Managed Dental Centers and occurs from time to time with other Managed Dental
Centers, the Company may elect to advance funds to cover such expenses. Such
advances are recorded on the Company's balance sheet as "Advances to PAs" until
repaid. At December 31, 1996 and June 30, 1997, Advances to PAs were $16,454
and $287,127, respectively. The failure of any of the PAs to repay such notes
or advances could have a material adverse effect on the Company's results of
operations and financial condition. Further, any decision by the Company to
continually make loans or advances to PAs, or the sustained inability of PAs to
repay such loans or advances, could necessitate adjustments to the Management
Agreements with such PAs to allow the PAs to retain a higher percentage of net
patient revenue or could require the Company to record additional reserves with
respect to such loans or advances, either of which events could have a material
adverse effect on the Company's results of operations and financial condition.
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RISKS OF PROVIDING DENTAL SERVICES. The Affiliated Dentists provide dental
services to the public and are exposed to the risk of professional liability
and other claims. Such claims, if successful, could result in substantial
damage awards to the claimants which may exceed the limits of any applicable
insurance coverage. The Company does not control the practice of dentistry by
the Affiliated Dentists or the compliance with regulatory and other
requirements directly applicable to the Affiliated Dentists and their
practices. Each Affiliated Dentist has undertaken, however, to comply with all
applicable regulations and requirements, and the Company is indemnified under
the Management Agreements for claims against the Company arising from the
performance of dental services provided by the Affiliated Dentists. Each PA and
Affiliated Dentist is required to have professional liability insurance with
limits of not less than $300,000 per claim and with aggregate policy limits of
not less than $1.0 million per Affiliated Dentist and the Company is named as
an additional insured party on most such liability insurance policies. There
can be no assurance that a future claim or claims will not be successful and,
if successful, will not exceed the limits of available insurance coverage and
the financial resources of the applicable PAs and the Affiliated Dentists, or
that any such insurance coverage will continue to be available at acceptable
costs and on favorable terms. See "Business--Insurance" and "Management
Agreements."
RISKS ASSOCIATED WITH IMPLEMENTATION OF NEW MANAGEMENT INFORMATION
SYSTEMS. The Company's management information systems are not fully automated,
and therefore the Company does not have real-time access to certain information
at its Managed Dental Centers. The Company is evaluating new software packages
that will replace its existing management information systems with fully
automated systems. Failure or significant delays in achieving integration or
complications with respect to the change to new software packages could have a
material adverse effect on the Company's results of operations and financial
condition.
RISKS ASSOCIATED WITH MANAGED CARE CONTRACTS. As an increasing percentage
of the population is covered by managed care organizations that provide dental
coverage, the Company believes that its success will, in part, be dependent
upon its ability to assist the PAs in negotiating favorable contracts with
health maintenance organizations ("HMOs"), health insurance companies and other
third party payors. Most of these contracts are terminable by either party on
90 days notice. There can be no assurance that the Company will be successful
in negotiating, managing or maintaining managed care arrangements on behalf of
the PAs. In addition, the health care industry has experienced a trend toward
cost containment as government and private third-party payors seek to impose
lower reimbursement and utilization rates and negotiate reduced payment
schedules with service providers. The Company believes that these trends may
result in a reduction from historical levels in per patient revenue of the
Managed Dental Centers. To the extent that patients or enrollees covered by
these contracts represent an increasing percentage of the revenues generated by
the PAs, the Company's operating margins may be adversely affected. Any such
reduction of operating margins could have a material adverse effect on the
Company's results of operations and financial condition.
RISKS OF BECOMING SUBJECT TO LICENSURE. Federal and state laws regulate
insurance companies, HMOs and certain other managed care organizations. Many
states also regulate the establishment and operation of networks of health care
providers. In most states, including Florida and Michigan, these laws do not
apply to discounted fee for service arrangements. The Company believes that it
is in compliance with the laws of the states of Florida and Michigan with
respect to the operation of its Dental Centers, but there can be no assurance
that interpretations of these laws by the regulatory authorities in Florida or
Michigan or in the states in which the Company expands will not require
licensure or a restructuring of some or all of the Company's operations. In the
event that the Company is required to become licensed under these laws, the
licensure process can be lengthy and time consuming and, unless the regulatory
authority permits the Company to continue to operate while the licensure
process is progressing, the Company would experience a material adverse change
in its business while the licensure process is pending. In addition, many of
the licensing requirements mandate strict financial and other requirements
which the Company may not be able to meet. Further, if licensed, the Company
would be subject to continuing oversight by, and reporting to, the relevant
regulatory agency. The regulatory framework of certain jurisdictions may limit
the Company's
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expansion into, or ability to continue operations within, such jurisdictions if
the Company is unable to modify its operational structure to conform with such
regulatory framework. Any limitation on the Company's ability to expand could
have a material adverse effect on the Company. In addition, there are state
insurance law regulatory risks associated with the Company's role in
negotiating and administering managed care contracts on behalf of the PAs.
State insurance laws are subject to broad interpretation by regulators. In the
event that the Company or the PAs are determined to be engaged in the business
of insurance, the Company 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 assurances that the Company's operations would not be
adversely affected if the Company or the PAs were to become subject to state
insurance regulations. See "Business--Governmental Regulation."
GEOGRAPHIC CONCENTRATION. The Company's operations are concentrated in the
Florida and Michigan markets and any adverse economic or regulatory
developments or action within these markets could have a material adverse
effect on the Company's business. In addition, the Company's expansion strategy
is dependent, in part, upon entering into Management Agreements with platform
practices in new markets. The Company's strategy of focused expansion within
new markets increases the risk to the Company that adverse economic or
regulatory developments in one or more of these new markets may have a material
adverse effect on the Company's business, financial condition and operating
results.
RISKS ARISING FROM HEALTH CARE REFORM. There can be no assurance that the
laws and regulations of the states in which the Company operates or may desire
to operate in the future will not change or be interpreted in the future to
restrict or adversely affect the Company's relationships with Affiliated
Dentists or the operation of Managed Dental Centers. Proposals that may be
introduced, could, if adopted, have a material adverse effect on the Company's
financial condition and results of operations. It is uncertain what legislative
programs, if any, will be adopted in the future, or what actions Congress or
state legislatures may take regarding health care reform proposals or
legislation.
ACCOUNTING TREATMENT FOR PHYSICIAN PRACTICE MANAGEMENT COMPANIES. The
Emerging Issues Task Force, an advisory committee of the Financial Accounting
Standards Board, is currently evaluating certain matters relating to accounting
practices for physician practice management companies, which the Company
expects will include a review of the consolidation of the financial statements
of professional corporations and professional associations with which such
companies have management agreements. Any required material changes to the
accounting practices of physician practice management companies resulting from
this review could have a material adverse effect on the Company's reported
results of operations.
DEPENDENCE ON KEY INDIVIDUALS. The success of the Company is dependent
upon the continued services of the Company's senior management. The Company's
success is also dependent upon the continued services rendered to the PAs by
the Dental Directors. The loss of the services of these individuals, including
Dr. Steven Matzkin, the Company's Chairman of the Board, President and Chief
Executive Officer, and Mitchell Olan, the Company's Vice President and Chief
Operating Officer, or impairment of the Company's relationship with Dr. Dennis
A. Corona, a Dental Director and the owner of 13 of the Florida PAs, or any
other Dental Director, could have a material adverse effect on the Company. The
Company believes that its future success also will depend in part upon its
ability to attract and retain qualified management personnel. Competition for
such personnel is intense and the Company competes for qualified personnel with
numerous other employers, some of whom have greater financial and other
resources than the Company. There can be no assurance that the Company will be
successful in attracting and retaining such personnel. See "Management."
CONTROL BY PRINCIPAL STOCKHOLDERS. Upon completion of the Offering, the
current stockholders of the Company will own approximately 71.0% of the
outstanding shares of Common Stock. Included in this percentage are shares of
Common Stock owned by Dr. Steven Matzkin and the SRM Children's Trust, a trust
for the benefit of Dr. Matzkin's children, which in the aggregate will own
approximately 47.3% of the outstanding shares of Common Stock. Accordingly, the
Company's current stockholders, as a group, will have the ability to control
all matters requiring stockholder approval, including the
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election of the Company's directors and any amendments to the Company's Amended
and Restated Certificate of Incorporation (the "Certificate") and Amended and
Restated Bylaws (the "Bylaws"), and to control the business of the Company.
Such control could preclude any acquisition of the Company and could adversely
affect the market price of the Common Stock. See "Principal and Selling
Stockholders" and "Description of Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of the Offering, the
Company will have outstanding 6,897,700 shares of Common Stock, of which the
2,000,000 shares sold in the Offering will be freely tradeable without
restriction or further registration under the Securities Act. The remaining
4,897,700 shares (the "Restricted Shares") are subject to certain restrictions
described below. Holders of the Restricted Shares will be eligible to sell a
portion of such shares pursuant to Rule 144 ("Rule 144") under the Securities
Act beginning in January 1998, subject to manner of sale, volume, notice and
information requirements of Rule 144. In addition, the Company has granted
certain registration rights with respect to 4,693,851 shares of Common Stock.
Notwithstanding the eligibility of certain shares to be sold following the
completion of the Offering, such shares are subject to certain additional
restrictions on transfer pursuant to certain agreements described below. See
"Description of Capital Stock--Registration Rights."
The Company and its executive officers, directors, and current
stockholders have agreed that they will not, directly or indirectly, offer,
sell, offer to sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale, contract
of sale, pledge, grant of any option to purchase or other sale or disposition)
of any shares of Common Stock or any securities convertible into, or
exercisable or exchangeable for, Common Stock or other capital stock of the
Company, or any right to purchase or acquire Common Stock or other capital
stock of the Company, for a period of 180 days after the date of this
Prospectus, without the prior written consent of Raymond James & Associates,
Inc. ("Raymond James"), except for (i) bona fide gifts or transfers effected by
such stockholders other than on any securities exchange or in the
over-the-counter market to donees or transferees that agree to be bound by
similar agreements (the "Lock-up Agreements"), (ii) sales made by Selling
Stockholders to the Underwriters of up to 300,000 shares to cover over-
allotments, if any, (iii) 17,771 shares (assuming an initial public offering
price of $12.00 per share) which may be sold by Dr. Dennis Corona in connection
with the acquisition of the dental assets of certain of the PAs and (iv)
pledges of shares held by Dr. Matzkin. Raymond James, in its sole discretion,
without notice, may release some or all of the shares subject to Lock-up
Agreements from time to time.
Additionally, the Company intends to file registration statements under
the Securities Act to register all shares of Common Stock subject to then
outstanding stock options and Common Stock issuable pursuant to the Omnibus
Plan and the Non-Qualified Plan. The Company expects to file these registration
statements following the closing of the Offering, and such registration
statements are expected to become effective upon filing. Shares covered by
these registration statements will thereupon be eligible for sale in the public
markets, subject to the Lock-up Agreements. Following the Offering, the Company
may issue its Common Stock from time to time in connection with the acquisition
of the non-dental assets of dental practices. Such securities may be issued in
registered transactions or in transactions exempt from registration under the
Securities Act.
Sales of substantial amounts of Common Stock in the public market, or the
availability of such shares for future sale, could adversely affect the market
price of the Common Stock and could impair the Company's future ability to
raise additional capital through an offering of its equity securities. See
"Shares Eligible for Future Sale" and "Underwriting."
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 public market for the Common Stock will develop or,
if a trading market does develop, that it will continue after the Offering. The
initial public offering price has been determined by negotiations among the
Company and the Underwriters. See "Underwriting" for a description of the
factors considered in determining the initial public offering price. The market
price of the Common Stock could be subject to significant fluctuations
15
<PAGE>
in response to variations in financial results or announcements of material
events by the Company or its competitors. Quarterly operating results of the
Company, changes in general conditions in the economy or the dental services
industry, or other developments affecting the Company or its competitors, could
cause the market price of the Common Stock to fluctuate substantially. The
Company has historically experienced seasonal fluctuation in its quarterly
revenue. Specifically, the first and fourth quarters reflect the highest
volume, while the third quarter has traditionally had the lowest volume. The
Managed Dental Centers in Florida have traditionally experienced increased
patient visits in November through March due to an increase in the population
base during these months, while patient visits decrease during the summer. In
addition, the equity markets have, on occasion, experienced significant price
and volume fluctuations that have affected the market prices for many
companies' securities and that have often been unrelated to the operating
performance of these companies. Concern about the potential effects of health
care reform measures has contributed to the volatility of stock prices of
companies in health care and related industries and may similarly affect the
price of the Common Stock following the Offering. Any such fluctuations that
occur following completion of the Offering may adversely affect the market
price of the Common Stock.
CERTAIN ANTI-TAKEOVER PROVISIONS. Certain provisions of Delaware Law and
the Certificate and Bylaws may make a change in control of the Company more
difficult to effect, even if a change in control were in the stockholders'
interest. In addition, the Certificate allows the Board of Directors to
determine the terms of preferred stock which may be issued by the Company
without approval of the holders of the Common Stock, and thereby enables the
Board of Directors to inhibit the ability of the holders of the Common Stock to
effect a change in control of the Company. See "Description of Capital
Stock-Provisions with Possible Antitakeover Effect."
The Company has entered into an employment agreement with Dr. Matzkin
which requires the Company to pay certain amounts to Dr. Matzkin upon his
termination following certain events, including a change in control of the
Company. Such agreement may inhibit a change in control of the Company. See
"Management-Employment Agreements."
BROAD DISCRETION OF MANAGEMENT IN APPLYING PROCEEDS OF OFFERING. The
Company intends to use the net proceeds of the Offering to lend money to PAs to
finance the purchase of the assets of dental practices, acquire the non-dental
assets of dental practices, to purchase the capital stock of Profit, to provide
working capital and for other general corporate purposes. Accordingly, the
Company's management will have broad discretion in applying the net proceeds of
the Offering. See "Use of Proceeds."
IMMEDIATE AND SUBSTANTIAL DILUTION. Purchasers of shares of Common Stock
in the Offering will experience immediate and substantial dilution of
approximately $8.70 in the pro forma net tangible book value per share of
Common Stock from the initial public offering price at an assumed initial
public offering price of $12.00 per share. See "Dilution."
ANTITRUST. The Company and the PAs with which it has Management Agreements
are subject to a range of antitrust laws that prohibit anti-competitive
conduct, including price fixing, concerted refusals to deal and divisions of
markets. Among other things, these laws may limit the ability of the Company to
enter into management agreements with separate practice groups that compete
with one another in the same geographic market. These laws do not apply to
dentists within the same practice group, such as dentists within a single PA,
but might be applicable as to Affiliated Dentists within the Company's separate
Managed Dental Centers in the same geographic market. In addition, these laws
prevent acquisitions of practices that would be integrated into existing
professional groups if such acquisitions substantially lessen competition or
tend to create a monopoly.
16
<PAGE>
THE COMPANY
The Company is the successor to the businesses of Golden Care Holdings
L.C. ("GCH") and its majority-owned subsidiaries, Prophet Management of
Florida, L.C., a Florida limited liability company ("Prophet"), and Golden Care
Network, L.C., a Florida limited liability company ("Golden Care"), which were
formed in 1992 and 1993, respectively, and commenced operations in 1993.
Prophet provided management services and Golden Care provided licensing
services to dental practices. These companies utilized the management approach
developed by Dr. Matzkin, the Company's President and Chief Executive Officer,
through the management of over 25 dental practices between 1982 and 1993.
Dental Care Alliance, Inc. was incorporated in 1996. See Note 1 to the
Consolidated Financial Statements of the Company.
The address of the Company's principal executive offices is 1343 Main
Street, Sarasota, Florida 34236 and its telephone number is (941) 955-3150.
RELATIONSHIP BETWEEN THE COMPANY AND THE PAS
The Company provides management and licensing services to 20 Managed
Dental Centers, 15 of which are located in Florida and five of which are
located in Michigan. In addition, the Company provides only licensing services
to three Licensed Dental Centers in Florida. The dental practice at each of the
Managed Dental Centers is owned by a separate PA. The Company has subcontracted
the day-to-day management of four Managed Dental Centers located in Michigan to
an affiliate of the PA that owns the practices conducted at such Managed Dental
Centers. The PAs receive their revenue from payments by or for patients, while
the Company receives fees from the PAs for providing management services and
support to the Managed Dental Centers and providing licensing services to all
Dental Centers. The Affiliated Dentists and dental hygienists are employed by
or contract with, and are compensated by, the PAs. The Company, or its
subcontractor for the four Detroit-area Managed Dental Centers, employ and
compensate all administrative and support staff, including receptionists,
office managers and dental assistants located in each Managed Dental Center.
The Company provides management and administrative services to the Managed
Dental Centers, allowing the Affiliated Dentists to focus exclusively on the
provision of dental care. The Affiliated Dentists provide general dentistry
services, such as examinations, cleanings, fillings, fitting of fixed and
removable dental prostheses, restorative and cosmetic dentistry, endodontics,
oral surgery and implantology, orthodontics and periodontics. The PAs maintain
full control over the dental practices of the Affiliated Dentists and set
prices for all dental services. Each PA makes all final decisions regarding
advertising and marketing programs related to its practice while the Company
assists in the development and implementation of advertising and marketing
programs. The Company purchases all non-dental inventory and supplies and, as
directed by the PAs, all dental inventory and supplies for each Managed Dental
Center.
The Company assists in marketing its network to health insurance
companies, HMOs and other third-party payors who have an established presence
in regional markets served, or expected to be served, by the PAs and supervises
the PAs' relationships with such third-party payors.
The Company has expanded and expects to continue to expand through the
addition of Dental Centers to its network. Prior to April 1997, the Company had
entered into Management Agreements with respect to PAs that had purchased both
the non-dental assets and the dental assets of such practices. In three cases
since that time, the Company has acquired the non-dental assets of dental
practices it has agreed to manage, while the PA has acquired the dental assets.
17
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered by the Company (at an assumed initial public offering
price of $12.00 per share), after deducting underwriting discounts and
commissions and estimated offering expenses, are estimated to be $21.2 million.
Such net proceeds will be used primarily (i) to lend money to PAs to finance
the purchase of the assets of additional dental practices, (ii) to acquire the
non-dental assets of additional dental practices,(iii) to provide working
capital and (iv) for general corporate purposes. The Company may use a portion
of the net proceeds of this Offering to purchase businesses complementary to
the business of the Company. The Company is currently considering the
acquisition of the capital stock of Profit. It is anticipated that such
acquisition will not happen prior to 1998 and will be consummated only upon
approval of the outside members of the Board of Directors. The owners of
certain PAs with which the Company has Management Agreements have executed
non-binding letters of intent to acquire ten dental practices, which practices
reported aggregate revenue for their last full fiscal year of approximately
$10.0 million. It is estimated that the aggregate purchase price for the dental
and the non-dental assets of these practices will be approximately $6.0
million. If such transactions are consummated, the acquiring PAs are expected
to enter into Management Agreements with the Company. No assurance can be given
that any such acquisitions will be consummated by the PA owner, that the
Company will enter into Management Agreements with respect to such practices or
that any such practices will be successfully integrated into the Company's
network. See "Risk Factors-Risks Associated with Expansion Strategy." Pending
such applications, the net proceeds will be invested in investment grade,
short-term, interest-bearing securities. The Company will not receive any of
the proceeds from the sale of any Common Stock by the Selling Stockholders
pursuant to the over-allotment option, if exercised. If any Selling Stockholder
fails to sell to the Underwriters any such additional shares, the Company has
agreed that it will issue and sell to the Underwriters an equal number of
shares of Common Stock. In such event the total proceeds to the Company will
increase by $11.16 (assuming an initial public offering price of $12.00 per
share) multiplied by the number of such additional shares issued by the
Company. See "Principal and Selling Stockholders."
DIVIDEND POLICY
The Company presently intends to retain all earnings for the operation and
development of its business and does not anticipate paying any cash dividends
on the Common Stock in the foreseeable future. Any future determination as to
the payment of cash dividends will depend on a number of factors, including
future earnings, capital requirements, the financial condition and prospects of
the Company and any restrictions under credit agreements existing from time to
time, as well as such other factors as the Company's Board of Directors may
deem relevant.
18
<PAGE>
DILUTION
Purchasers of Common Stock offered hereby will experience an immediate and
substantial dilution in the pro forma net tangible book value of the Common
Stock from the initial public offering price. At June 30, 1997, the pro forma
net tangible book value of the Company was $1,512,280, or $.31 per share pro
forma. Net tangible book value per share is determined by dividing the
Company's net tangible book value (tangible assets less total liabilities), by
the number of shares of pro forma Common Stock outstanding. Pro forma
information gives effect to the conversion of the mandatorily convertible
Series A Preferred Stock to 654,359 shares of Common Stock upon completion of
this Offering and reflects the termination of put rights relating to 530,010
shares of Common Stock. After giving effect to the sale of 2,000,000 shares of
Common Stock offered hereby (at an assumed initial public offering price of
$12.00 per share), after deducting underwriting discounts and commissions and
estimated offering expenses, the pro forma net tangible book value of the
Company at June 30, 1997 would have been $22,732,280 or $3.30 per share. This
represents an immediate increase in pro forma net tangible book value of $2.99
per share to existing stockholders and an immediate dilution in pro forma net
tangible book value of $8.70 per share to new investors purchasing shares of
Common Stock in the Offering. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price .............................. $ 12.00
Pro forma net tangible book value at June 30, 1997 .................. $ .31
Increase attributable to new investors .............................. 2.99
--------
Pro forma net tangible book value after the Offering ............... 3.30
--------
Dilution in pro forma net tangible book value to new investors ...... $ 8.70
========
</TABLE>
The following table sets forth, on a pro forma basis at June 30, 1997, the
differences between the existing stockholders and the new investors purchasing
shares in the Offering with respect to the number of shares of Common Stock
purchased from the Company, the total consideration paid to the Company and the
average price per share at an assumed initial public offering price of $12.00
per share, without giving effect to underwriting discounts and commissions and
offering expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED(1) TOTAL CONSIDERATION
----------------------- ------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- --------- ------------- --------- --------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(2) ...... 4,897,700 71.0% $ 2,279,290 8.7% $ .47
New investors .................. 2,000,000 29.0 24,000,000 91.3 $12.00
--------- ------ ------------ ------
Total ........................ 6,897,700 100.0% 26,279,290 100.0%
========= ====== ============ ======
</TABLE>
- ----------------
(1) Assuming the Underwriters' over-allotment option is exercised in full,
existing stockholders will hold 4,597,700 shares, or 66.7% of the total
number of shares outstanding after the Offering, and the number of shares
held by new investors will increase by 300,000 shares to 2,300,000 shares,
or 33.3% of the total shares of Common Stock outstanding after the
Offering. See "Principal and Selling Stockholders."
(2) Does not include (i) an aggregate of 250,000 shares of Common Stock
reserved for issuance under the Omnibus Plan, of which options for
approximately 66,000 shares will be granted upon consummation of this
Offering at a per share exercise price equal to the public offering price
per share, (ii) an aggregate of 425,000 shares of Common Stock reserved
for issuance under the Non-Qualified Plan, of which options for
approximately 135,000 shares will be granted upon consummation of the
Offering at a per share exercise price equal to the public offering price
per share, (iii) 53,001 shares of Common Stock to be reserved for issuance
(assuming an initial public offering price of $12.00 per share) pursuant
to warrants to be issued upon consummation of the Offering at a weighted
average exercise price equal to $1.74 per share, (iv) 49,576 shares of
Common Stock reserved for issuance pursuant to outstanding options to
purchase Common Stock at a weighted average exercise price of $1.53 per
share and (v) options to purchase 17,771 shares (assuming an initial
public offering price of $12.00 per share) at the initial public offering
price. See "Management-Omnibus Executive Incentive Compensation Plan,"
"--Non Qualified Stock Option Plan" and "Description of Capital
Stock--Warrants and Options to Purchase Common Stock."
19
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
June 30, 1997, (i) on an actual basis, and (ii) on a pro forma as adjusted
basis to give effect to the conversion of the mandatorily convertible Series A
Preferred Stock to 654,359 shares of Common Stock upon completion of this
Offering and to the termination of put rights relating to 530,010 shares of
Common Stock and to reflect the sale by the Company of 2,000,000 shares of
Common Stock offered hereby (at an assumed offering price of $12.00 per share),
and the application of the estimated net proceeds therefrom as described under
"Use of Proceeds." This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements included elsewhere herein.
<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------
PRO FORMA,
ACTUAL AS ADJUSTED
------------ ------------
<S> <C> <C>
Current maturities of long-term debt ................................. $ 161,807 $ 161,807
========== ===========
Long-term debt, net of current maturities ........................... 28,746 28,746
Mandatorily redeemable preferred stock, $.01 per share, 15,000
shares, authorized, issued and outstanding, actual; none authorized,
issued or outstanding, pro forma as adjusted ........................ 1,473,062 --
Put rights associated with common stock .............................. 191,237 --
Preferred stock, $.01 par value, no shares authorized, issued or
outstanding, actual; 5,000,000 shares authorized, no shares issued or
outstanding, pro forma as adjusted .................................
Common stock, $.01 par value, 50,000,000 authorized, 4,243,342 shares
issued and outstanding, actual; 6,897,700 shares issued and
outstanding, pro forma as adjusted ................................. 42,433 68,977
Additional paid-in capital .......................................... 844,506 23,702,261
Stock subscription receivable ....................................... (272,268) (272,268)
Retained earnings ................................................... 26,845 26,845
---------- -----------
Total capitalization ................................................ $2,334,561 $23,554,561
========== ===========
</TABLE>
- ----------------
(1) Does not include (i) an aggregate of 250,000 shares of Common Stock
reserved for issuance under the Omnibus Plan, of which options for
approximately 66,000 shares will be granted upon consummation of this
Offering at a per share exercise price equal to the public offering price
per share, (ii) an aggregate of 425,000 shares of Common Stock reserved
for issuance under the Non-Qualified Plan of which options for
approximately 135,000 shares will be granted upon consummation of the
Offering at a per share exercise price equal to the public offering price
per share, (iii) 53,001 shares of Common Stock to be reserved for issuance
(assuming an initial public offering price of $12.00 per share) pursuant
to warrants to be issued upon consummation of the Offering at a weighted
average exercise price equal to $1.74 per share, (iv) 49,576 shares of
Common Stock reserved for issuance pursuant to outstanding options to
purchase Common Stock at a weighted average exercise price of $1.53 per
share and (v) options to purchase 17,771 shares (assuming an initial
public offering price of $12.00 per share) at the initial public offering
price. See "Management--Omnibus Executive Incentive Compensation Plan"
"--Non Qualified Stock Option Plan" and "Description of Capital
Stock--Warrants and Options to Purchase Common Stock."
20
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The Company commenced operations in November 1993. The following selected
consolidated financial data for the year ended December 31, 1993 and at
December 31, 1993 are derived from the unaudited Consolidated Financial
Statements of the predecessors of Dental Care Alliance, Inc. The following
selected consolidated financial data for the years ended December 31, 1994,
1995 and 1996 and at December 31, 1994, 1995 and 1996 are derived from the
Consolidated Financial Statements of Dental Care Alliance, Inc. and its
predecessors which have been audited by Price Waterhouse LLP, independent
certified public accountants. The financial data presented below for the six
month periods ended June 30, 1996 and 1997 and at June 30, 1997 are unaudited
and were prepared by management of the Company on the same basis as the audited
Consolidated Financial Statements included elsewhere herein, and, in the
opinion of management of the Company, include all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly the information
set forth therein. The results for the six months ended June 30, 1997 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1997 or future periods. The following information should be read
in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and other financial information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1993 1994 1995 1996
------------- ---------- ------------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Management fees .................................... $ 83,700 $673,304 $ 513,705 $1,289,828
Consulting and licensing fees ........................ -- 42,763 262,769 347,600
--------- --------- --------- ----------
Total revenues .................................... 83,700 716,067 776,474 1,637,428
--------- --------- --------- ----------
Managed dental center expenses(1):
Staff salaries and benefits ........................ -- -- -- 223,657
Dental supplies .................................... -- -- -- 79,448
Laboratory fees .................................... -- -- -- 98,222
Marketing .......................................... -- -- -- 38,128
Occupancy .......................................... -- -- -- 106,501
Other ............................................. -- -- -- 57,182
--------- --------- --------- ----------
Total managed dental center expenses ............... -- -- -- 603,138
--------- --------- --------- ----------
83,700 716,067 776,474 1,034,290
Salaries and benefits .............................. 8,339 408,716 400,669 521,683
General and administrative ........................... 16,064 204,901 234,577 260,558
Advisory services(2) ................................. -- -- 127,768 --
Depreciation and amortization ........................ -- 15,150 22,106 27,654
--------- --------- --------- ----------
Operating income (loss) ........................... 52,297 87,300 (8,646) 224,395
Interest income (expense), net ..................... 22,584 6,494 20,781
--------- --------- ----------
Income (loss) before income taxes
and minority interest .............................. 52,297 109,884 (2,152) 245,176
Provision for income taxes ........................... -- 19,919 -- 35,500
Minority interest .................................... 2,440 8,654 7,674
--------- --------- ----------
Net income (loss) ................................. $ 52,297 $ 87,525 $ (10,806) $ 202,002
========= ========= ========= ==========
Adjustment to redemption value of common
and preferred securities ........................... -- 39,951 85,709 (191,237)
Cumulative preferred stock dividend .................. -- -- (6,485)
--------- --------- ----------
Net income (loss) applicable to common stock ......... -- $127,476 $ 74,903 $ 4,280
========= ========= ========= ==========
Unaudited pro forma data:
Income (loss) before income taxes and
minority interest ................................. $109,884 $ (2,152) $ 245,176
Pro forma provision for income taxes(3) ............... 63,000 42,000 -- 94,000
--------- --------- --------- ----------
Minority interest in consolidated subsidiaries ...... -- 1,507 5,343 4,739
--------- --------- --------- ----------
Pro forma net income ................................. $101,103 $ 66,377 $ (7,495) $ 146,437
========= ========= ========= ==========
Pro forma net income per common share ............... $ .03
==========
Weighted average common shares outstanding ......... 4,773,071
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------
1996 1997
----------- --------------
(UNAUDITED)
<S> <C> <C>
INCOME STATEMENT DATA:
Management fees .................................... $405,072 $2,471,759
Consulting and licensing fees ........................ 138,812 161,885
-------- ----------
Total revenues .................................... 543,884 2,633,644
-------- ----------
Managed dental center expenses(1):
Staff salaries and benefits ........................ -- 601,383
Dental supplies .................................... -- 213,334
Laboratory fees .................................... -- 373,010
Marketing .......................................... -- 176,627
Occupancy .......................................... -- 333,085
Other ............................................. -- 326,494
-------- ----------
Total managed dental center expenses ............... -- 2,023,933
-------- ----------
543,884 609,711
Salaries and benefits .............................. 261,642 373,016
General and administrative ........................... 118,476 135,970
Advisory services(2) ................................. -- --
Depreciation and amortization ........................ 10,254 41,578
-------- ----------
Operating income (loss) ........................... 153,512 59,147
Interest income (expense), net ..................... (5,058) 36,464
-------- ----------
Income (loss) before income taxes
and minority interest .............................. 148,454 95,611
Provision for income taxes ........................... -- 36,000
Minority interest .................................... 3,537 --
-------- ----------
Net income (loss) ................................. $144,917 $ 59,611
======== ==========
Adjustment to redemption value of common
and preferred securities ........................... -- (10,500)
Cumulative preferred stock dividend .................. -- (60,000)
-------- ----------
Net income (loss) applicable to common stock ......... $144,917 $ (9,889)
======== ==========
Unaudited pro forma data:
Income (loss) before income taxes and
minority interest ................................. $148,454 $ 95,611
Pro forma provision for income taxes(3) ............... 57,000 36,000
-------- ----------
Minority interest in consolidated subsidiaries ...... 2,184 --
-------- ----------
Pro forma net income ................................. $ 89,270 $ 59,611
======== ==========
Pro forma net income per common share ............... $ .01
==========
Weighted average common shares outstanding ......... 4,773,071
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------------------ AT JUNE 30,
1993 1994 1995 1996 1997
------------- ---------- ---------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital ................................. $144,497 $113,385 $ 98,676 $ 965,853 $ 851,382
Total assets .................................... 187,203 466,820 524,543 3,122,939 3,370,468
Long-term debt, including current maturities ...... 22,100 209,437 163,745 214,002 190,553
Redeemable common and preferred securities ...... -- -- -- 1,593,799 1,664,299
Stockholders' equity .............................. 165,103 118,400 296,837 632,285 641,516
</TABLE>
- ----------------
(1) Effective October 1996, the Company revised the terms of all of its 12 then
existing Management Agreements such that the Company is responsible for
the payment of all non-professional expenses of the Managed Dental
Centers. Ten Management Agreements were also revised to base the Company's
management fee from a percentage of net profits at each PA to a percentage
of net patient revenues from each PA. Accordingly, prior to these
revisions to such 12 Management Agreements, all non-professional expenses
of the Managed Dental Centers and related revenues were reflected in each
PA's financial statements. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(2) Represents non-cash charges for warrants issued in consideration for
certain financial advisory services.
(3) Pro forma adjusted to reflect a 38% income tax rate as if the Company was
taxed as a C Corporation prior to October 25, 1996 when the Company was
reorganized from Limited Liability Corporation status to C Corporation
status. See Notes 2 and 7 of Notes to Consolidated Financial Statements.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
Dental Care Alliance, Inc. is a dental practice management company
providing management and licensing services to dental practices in Florida and
Michigan. The Company provides management and licensing services to 20 Managed
Dental Centers, 15 of which are located in Florida and five of which are
located in Michigan. Additionally, the Company provides only licensing services
to three Licensed Dental Centers in Florida. Management services include
financial, accounting, billing, training, efficiency and productivity
enhancement, recruiting, team building, marketing, advertising, purchasing,
collection and other services, as well as the provision of management and
administrative personnel. Licensing services include marketing, advertising and
purchasing.
With respect to management services it provides to dental practices, the
Company enters into Management Agreements with the PAs that own the practices.
The Company commenced operations in November 1993 by providing management and
licensing services to five dental practices located in Sarasota, Palmetto,
Largo, Port Charlotte and Venice, Florida. In 1994, the Company entered into
its first Management Agreement for a newly developed practice, located in
Englewood, Florida and entered into a Management Agreement to manage an
additional existing practice in Fort Myers, Florida. In 1995, the Company
entered into four new Management Agreements, two of which were with respect to
newly developed practices located in Kissimmee and Bradenton, Florida and the
remaining two of which were with respect to existing practices located in
Sarasota and Port Richey, Florida. The Company entered into four additional
Management Agreements in 1996 to manage practices located in Orlando, Tampa,
Ocoee and Clearwater, Florida. In addition, the Company terminated its
Management Agreements with respect to the Palmetto and Venice Managed Dental
Centers in 1995 and with respect to the Port Richey Managed Dental Center in
1996.
The Company believes that certain of the Management Agreements are
material to the Company as a whole. See "Risk Factors--Dependence on Management
Agreements, the PAs and Affiliated Dentists."
In April 1997, the Company purchased the non-dental assets of, and entered
into a Management Agreement with respect to a dental practice in Tampa,
Florida. In July 1997, the Company entered into a Management Agreement with
respect to four dental practices located in the Detroit, Michigan area. In July
1997, the Company entered into a Management Agreement with respect to a dental
practice in Flint, Michigan. In August 1997, the Company purchased the
non-dental assets of, and entered into a Management Agreement with respect to,
a dental practice located in Tallahassee, Florida. In September 1997, the
Company purchased the non-dental assets of, and entered into a Management
Agreement with respect to, a dental practice located in St. Petersburg,
Florida.
Owners of certain PAs with which the Company has Management Agreements
have executed non-binding letters of intent to acquire ten dental practices
employing 50 dentists, many of whom are part-time, and 23 dental hygienists,
which practices reported aggregate revenue for their respective last full
fiscal years of approximately $10.0 million. If such transactions are
consummated, the acquiring PAs are expected to enter into net patient
revenue-based Management Agreements with the Company. There can be no assurance
that the Company will enter into Management Agreements with respect to such
practices or that any such practices will be integrated successfully into the
Company's network.
Prior to October 1996, the management fee paid to the Company pursuant to
the Management Agreements had been equal to a percentage ranging from 50-90% of
the net profits of the individual Managed Dental Centers, as defined in the
Management Agreements, plus reimbursement to the Company of its
non-professional expenses. Effective October 1996, the Company revised all of
its 12 then existing Management Agreements. Ten of these agreements were
revised such that the Company earns management fees based on 74% of total net
patient revenues and is paid based on cash collected
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minus any patient refunds ("Net Collected Revenue") and the Company assumes
responsibility for the payment of the non-professional expenses of the Managed
Dental Centers (the "Standard Management Agreements"). The remaining two
Management Agreements continue to have management fee structures based upon
50-55% of the net profit of the two related Managed Dental Centers. The Company
will seek to cause future Management Agreements to be on terms substantially
similar to those of the Standard Management Agreements. See
"Business--Management Agreements." Period to period comparisons of the
Company's results of operations set forth below should be considered in light
of the significant changes in the Company's recognition of revenues and
expenses resulting from the revisions to the Management Agreements in October
1996.
All patient revenues are billed to patients and providers under the
authority and identification numbers of the individual PAs. Patient revenues
and receivables are recorded on the accounts of the PAs. Funds are disbursed
initially to pay all the professional costs of the PAs. Thereafter, funds are
disbursed to the Company under the terms of the Management Agreements. Any
remaining funds are retained by the PA. If funds are insufficient to pay the
Company under the terms of the relevant Management Agreement, a payable from
the PA to the Company is recorded on the Company's books.
The Company also enters into license agreements with each Dental Center
pursuant to which the Company provides licensing and advertising services to
the Dental Centers. In return for such services, the Company has collected fees
generally ranging from $800 to $1,000 per month from each Managed Dental Center
and from $600 to $1,200 from each Licensed Dental Center.
Historically, in connection with the execution of a Management Agreement,
a PA has typically acquired both the dental and the non-dental assets of a
Managed Dental Center. The Company has either made loans to the acquiring PA or
has assisted the PA in obtaining third-party financing to purchase such assets.
Recently, the Company has acquired the non-dental assets of three Managed
Dental Centers while the PAs acquired the dental assets of such Managed Dental
Centers. The Company intends to use the proceeds of this Offering in part to
make additional loans to PAs to purchase both the dental and non-dental assets
of additional Managed Dental Centers and in part for the Company to acquire the
non-dental assets of additional Managed Dental Centers.
The Company does not consolidate the balance sheets or the operating
results (including revenues and expenses) of the dental practices under the
Management Agreements since these revenues and expenses are earned and incurred
by the PAs, not the Company. Similarly, the Company does not record any
goodwill in connection with its execution of the Standard Management Agreements
or the acquisition of non-dental assets from a dental practice, since neither
of such transactions constitutes a business combination. The Company has
recorded goodwill and other intangible assets in cases where the Company has
paid a PA in consideration for a modification to an existing Management
Agreement.
Prior to October 1996, the majority of the Company's operations were
performed through limited liability companies. Except for the period from
January through September, 1994 with respect to one of the Company's
predecessors in interest, the Company's statements of operations prior to
October 1996 do not include a provision for income taxes. Included in the
Company's 1996 tax provision are amounts related to the income tax expense
associated with establishing a deferred tax liability for book/tax differences
arising from its reorganization from Limited Liability Corporation to C
Corporation status.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
MANAGEMENT FEES. Management fees consist of a percentage of the net
realizable patient-related revenue at the majority of the PAs and a percentage
of the net realizable profits earned by the remaining PAs. Management fees
increased 510.2% from $405,072 for the six months ended June 30, 1996 to $2.5
million for the six months ended June 30, 1997, primarily due to the change in
the Management Agreements in October 1996. Prior to 1996 the Company was not
responsible for any managed dental center expenses.
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CONSULTING AND LICENSING FEES. Consulting and licensing fees consist of
fees earned by the Company for licensing services to all of the Dental Centers
and consulting services to four Managed Dental Centers in Michigan. As a result
of the Company's execution of a new Management Agreement in July 1997,
effective July 1, 1997, with respect to these four Managed Dental Centers,
income from consulting fees will be included in management fees. Consulting and
licensing fees increased 16.6% from $138,812 for the six months ended June 30,
1996 to $161,885 for the six months ended June 30, 1997. This increase was
caused primarily by the addition of four Managed Dental Centers in June 1996.
MANAGED DENTAL CENTER EXPENSES. Managed dental center expenses consist of
the non-professional expenses at the Managed Dental Centers. Managed dental
center expenses increased from $0 for the six months ended June 30, 1996 to
$2.0 million for the six months ended June 30, 1997, primarily due to the
change in the Management Agreements in October 1996. Prior to 1996, the Company
was not responsible for any managed dental center expenses.
SALARIES AND BENEFITS. Salaries and benefits consist of costs for salaries
and benefits for employees at the Company's corporate offices. Salaries and
benefits increased 42.6% from $261,642 for the six months ended June 30, 1996
to $373,016 for the six months ended June 30, 1997. This increase in salaries
and benefits was caused primarily by the hiring of additional personnel in the
Company's accounting and business development departments.
GENERAL AND ADMINISTRATIVE. General and administrative expense consists of
expenses related to the operation of the Company's corporate offices, such as
rent, legal, accounting and travel expenses. General and administrative expense
increased 14.8% from $118,476 for the six months ended June 30, 1996 to
$135,970 for the six months ended June 30, 1997. This increase was caused
primarily by additional occupancy expenses associated with the Company's
expansion of its corporate headquarters and secondarily by additional
travel-related expense incurred in connection with business development.
DEPRECIATION AND AMORTIZATION. Depreciation consists of the depreciation
expense on capital assets owned by the Company and located at either the
corporate offices or at Managed Dental Centers. Depreciation and amortization
expense increased 305.5% from $10,254 for the six months ended June 30, 1996 to
$41,578 for the six months ended June 30, 1997. This increase was caused
primarily by amortization of Management Agreements capitalized in October 1996
in connection with the revisions to the Management Agreements at that time and
secondarily by depreciation resulting from the purchase of equipment for a
Managed Dental Center.
INTEREST INCOME (EXPENSE), NET. Interest income (expense), net increased
$41,522 from $(5,058) for the six months ended June 30, 1996 to $36,464 for the
six months ended June 30, 1997. This increase was attributable primarily to
earnings on the higher cash balance as well as earnings on a new note
receivable in February 1997.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
MANAGEMENT FEES. Management fees increased 151.1% from $513,705 in 1995
to $1.3 million in 1996. This increase resulted primarily from the October 1996
revision to the Management Agreements and, to a significantly lesser extent,
the execution of four new Management Agreements.
CONSULTING AND LICENSING FEES. Consulting and licensing fees increased
32.3% from $262,769 in 1995 to $347,600 in 1996. This increase was attributable
primarily to an increase in the consulting fees earned from the Michigan
practices, additional license fees earned from four new Managed Dental Centers
and a full year of license fees from four Managed Dental Centers acquired in
1995.
MANAGED DENTAL CENTER EXPENSES. Managed dental center expenses increased
from $0 in 1995 to $603,138 in 1996. This increase was attributable to the
revisions to the Management Agreements in October 1996. Prior to 1996, the
Company was not responsible for any managed dental center expenses.
SALARIES AND BENEFITS. Salaries and benefits increased 30.2% from $400,669
in 1995 to $521,683 in 1996. This increase was attributable primarily to the
hiring of additional staff at four new Managed Dental Centers.
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<PAGE>
GENERAL AND ADMINISTRATIVE. General and administrative expense increased
11.1% from $234,577 in 1995 to $260,558 in 1996. This increase was attributable
to increased expense associated with the revised Management Agreements and the
cost of incorporating and recapitalizing the Company.
ADVISORY SERVICES. Advisory services expense relates to non-cash charges
for warrants issued in consideration of certain advisory services rendered to
the Company by a third party. Advisory services expense decreased from $127,768
in 1995 to $0 in 1996 as a result of a one time recognition in 1995 of such
expense.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased 25.1% from $22,106 in 1995 to $27,654 in 1996. This increase was
attributable to depreciation of additional equipment, amortization of
incorporation costs and amortization of Management Agreements capitalized in
October 1996 in connection with the revision of the Management Agreements.
INTEREST INCOME (EXPENSE), NET. Interest income (expense), net increased
220.0% from $6,494 in 1995 to $20,781 in 1996. This increase was attributable
primarily to earnings on increased cash balances and earnings on notes
receivable from Managed Dental Centers.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
MANAGEMENT FEES. Management fees decreased 23.7% from $673,304 in 1994 to
$513,705 in 1995. This decrease was attributable to the termination of two
Management Agreements in June 1995. The Company added four new Management
Agreements, however, management fees earned from the new Management Agreements
were insufficient to replace the lost management fees from the two terminated
agreements.
CONSULTING AND LICENSING FEES. Consulting and licensing fees increased
514.5% from $42,763 in 1994 to $262,769 in 1995. This increase was attributable
to an increase in the number of License Agreements, and the receipt of a full
year of consulting fees from four Michigan practices.
MANAGED DENTAL CENTER EXPENSES. Managed dental center expenses were $0 for
both 1994 and 1995 as the Company was not responsible for any dental center
expenses in either 1994 or 1995.
ADVISORY SERVICES. Advisory services expense increased from $0 in 1994 to
$127,768 in 1995 as a result of a one-time recognition of an expense in 1995 as
discussed above.
INTEREST INCOME (EXPENSE), NET. Interest income (expense), net decreased
71.2% from $22,584 in 1994 to $6,494 in 1995. This decrease was attributable
primarily to decreased cash balances due to repayment of long-term debt and
dividends.
SEASONALITY
The Company historically has experienced seasonal fluctuations in its
quarterly revenue. Specifically, the first and fourth quarters reflect the
highest patient volume, while the third quarter has traditionally had the
lowest patient volume. The Managed Dental Centers in Florida have traditionally
experienced increased patient visits in November through March due to an
increase in the population base during these months, while patient visits
decrease during the summer. Beginning in July 1997, the Company executed
Management Agreements with Managed Dental Centers in Michigan. The Company
expects that the seasonality in Florida will be offset to some extent by fewer
seasonal fluctuations in Michigan.
QUARTERLY FINANCIAL INFORMATION
The following table sets forth unaudited quarterly operating results for
each of the Company's last four quarters. This information has been prepared on
a basis consistent with the Company's audited
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financial statements and includes all adjustments (consisting only of normal
recurring adjustments) that management considers necessary for a fair
presentation of the data. These quarterly results are not necessarily
indicative of future results of operations. This information should be read in
conjunction with the Consolidated Financial Statements and Notes thereto
appearing elsewhere herein.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1996 1996(1) 1997 1997
--------------- -------------- ------------ -----------
<S> <C> <C> <C> <C>
Total revenues ........................ $ 208,794 $837,214 $1,204,681 $1,428,963
Managed dental center expenses ...... -- 603,138 921,142 1,102,791
Operating income ..................... (122,768) 71,649 28,707 30,440
Net income ........................... (125,383) 66,766 26,622 32,989
</TABLE>
- ----------------
(1) Effective October 1996, the Company revised the terms of all of its 12 then
existing Management Agreements such that the Company is responsible for
the payment of all non-professional expenses of the Managed Dental
Centers. Ten Management Agreements were also revised to base the Company's
management fee from a percentage of net profits at each PA to a percentage
of net patient revenues from each PA. Accordingly, prior to these
revisions to such 12 Management Agreements, all non-professional expenses
of the Managed Dental Centers and related revenues were reflected in each
PA's financial statements. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations primarily
through internal cash flow, the sale of equity securities and commercial bank
borrowings. Net cash (used in) provided by operations for the years ended
December 31, 1994, 1995, 1996 and the six months ended June 30, 1997 was
($82,200), $75,873, $270,121 and $83,461, respectively. Net cash (used in)
provided by operations for 1994, 1995, 1996 and the six months ended June 30,
1997 consisted primarily of net income offset by increases in consulting and
licensing fees receivable, receivables from PAs and accounts payable and
accrued expenses.
Cash used in investing activities for the years ended December 31, 1994,
1995, 1996 and the six months ended June 30, 1997 was $294,064, $5,649,
$487,858 and $186,401, respectively. Investing activities included capital
expenditures for 1994, 1995, 1996 and the six months ended June 30, 1997 of
$177,778, $4,703, $4,444 and $211,040. For the year ended December 31, 1994,
the Company made advances under notes to the PAs in the net amount of $116,286.
Subsequent to 1994, the Company has received payments under these notes or made
advances under new notes for the years ended December 31, 1995, 1996 and the
six months ended June 30, 1997 in the net amounts of $19,054, $3,075 and
$24,639.
Cash provided by (used in) financing activities for the years ending
December 31, 1994, 1995, 1996 and the six months ending June 30, 1997 was
$273,763, $(69,926), $1,428,803 and $(274,102). The financing activities
increased primarily as a result of the issuance of long-term debt of $211,584
in 1994 and the issuance of preferred stock of $1.5 million (net of issuance
costs of $105,000) in 1996, which were offset each year through the repayment
of long-term indebtedness.
In August 1997, the Company entered into a revolving line of credit (the
"Credit Agreement") which provides for an aggregate of $1.2 million. Under the
terms of the Credit Agreement, the Company may use up to $600,000 of the credit
line for the purchase of non-dental assets of dental centers provided that each
borrowing is repaid within 45 days of its drawdown. The remaining $600,000 may
be used for general working capital needs. The revolving line of credit bears
interest at 0.75% per annum above the lender's prime rate and is payable on
demand. Interest only is payable monthly. Amounts borrowed pursuant to the
Credit Agreement are secured by a first security interest in most of the
Company's assets, including receivables and equipment. Additionally, any
outstanding balances under the working capital line are guaranteed by Dr.
Steven R. Matzkin, the Company's Chairman of the Board, President and Chief
Executive Officer. The Company intends to use its credit line, together with
its available cash, to fund any working capital needs and to purchase
non-dental assets of dental centers.
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The Company previously has made loans to various PAs in connection with
the PAs' acquisition of assets of dental practices and has made working capital
advances to various PAs for their operations. The loans, which are evidenced by
interest-bearing notes that are payable upon demand, are being repaid in
accordance with their terms. Both the loans and advances are personally
guaranteed by the PA owners.
The Company intends to enter into additional Management Agreements with
respect to, as well as purchase the non-dental assets of, additional practices.
In addition, the Company intends to lend money to PAs to fund the purchase of
the assets of additional dental practices. The Company plans to finance these
activities through a combination of the net proceeds of this Offering, cash
flow from operations, bank financing and issuances of Common Stock. See "Use of
Proceeds."
Based upon the Company's anticipated needs for loans and advances to PAs,
acquisition of non-dental assets of dental practices, capital expenditures, the
purchase of the capital stock of Profit and general corporate purposes,
management believes that the combination of existing cash, cash flow from
operations, available credit lines and the net proceeds received from this
Offering will be sufficient to meet its capital requirements through 1998.
INFLATION
Inflation has not had a significant impact on the Company in the past
three years nor is it expected to have a significant impact in the foreseeable
future.
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BUSINESS
GENERAL
Dental Care Alliance, Inc. provides management and licensing services to
dental practices in Florida and Michigan. The Company currently provides
services to 23 Dental Centers, 20 of which are Managed Dental Centers, and
three of which are Licensed Dental Centers. Management services include
financial, accounting, billing, training, efficiency and productivity
enhancement, recruiting, team building, marketing, advertising, purchasing,
collection and other services, as well as the provision of management and
administrative personnel. Licensing services include marketing, advertising and
purchasing. The Company currently is expanding in Florida and Michigan and
intends to selectively expand into new markets. See "The Company" and Note 1 to
the Consolidated Financial Statements for information relating to the history
of the Company.
THE DENTAL SERVICES INDUSTRY
The dental services industry in the United States is large and highly
fragmented. According to HCFA, expenditures for all dental services were an
estimated $45.8 billion in 1995 and are expected to reach $59.1 billion in
2000, representing a 5.2% compound annual growth rate. The Company believes
this anticipated growth is principally due to an increase in availability of
various types of dental insurance, an increase in demand for dental services as
the United States population ages, an increase in demand for preventive and
cosmetic dentistry and advances in dental technology. According to the ADA, in
1994 dental services in the United States were provided by approximately
153,000 dentists, 87.7% of whom practiced alone or with one other dentist.
These solo practitioners and small group practices have traditionally managed
all aspects of their dental practices, including the administrative,
purchasing, accounting, marketing, recruiting and business development
functions.
Several factors are contributing to the increased formation of larger
group practices. Dental practices are becoming increasingly complex to manage
due, in part, to the shift to third-party reimbursement. Other contributing
factors include the economies of scale achievable in such areas as
administration, purchasing and advertising, the need for cost-effective
management of patient care, the desire to capture revenues from higher-margin
specialty procedures which would otherwise be referred to independent
specialists, and the growing importance of capital resources to acquire and
maintain state-of-the-art dental equipment, clinical facilities and management
information systems.
A major factor driving consolidation of dental providers is the increasing
prevalence of third-party payor programs. The number of individuals covered by
private dental insurance, including various managed care and indemnity plans,
has increased and is expected to increase further as health insurers attempt to
gain a competitive advantage by offering dental insurance packages to present
and prospective members, enabling employers to add dental care to benefits
packages at moderate incremental cost. According to HCFA, payment for dental
services by private insurance companies was approximately $22.0 billion in
1995.
Despite the growth in private dental insurance, according to the National
Association of Dental Plans in 1995 approximately 54% of the United States
population was not covered by any type of private or government funded dental
insurance. This uninsured population includes lower income individuals who
cannot afford a basic level of dental services and individuals who typically
obtain dental services as needed on a fee-for-service basis. To address the
dental care needs of the lower income segment of the uninsured population,
Medicaid HMOs have begun offering preventive dental services as a standard
feature to plan members.
The Company anticipates that as the number of managed care plans and
government funded programs providing dental insurance grows, pressures to
contain costs will increase, as has been the case in many other sectors of the
health care industry. Such cost containment pressures will likely place solo
practitioners and small dental group practices at a significant disadvantage.
Furthermore, in order to
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properly negotiate and administer dental managed care contracts, dental care
providers must have management expertise and sophisticated information systems
which often exceed the capabilities of sole practitioners and small dental
practice groups.
BUSINESS STRATEGY
The Company believes it is well-positioned to respond successfully to
recent trends driving dental provider consolidation. The Company's objective is
to become a leading dental practice management company in each of its target
markets. To achieve this objective the Company seeks to grow rapidly through a
combination of internal growth and external expansion. The key elements of its
internal growth strategy are to: (i) increase revenues and operating income at
Managed Dental Centers primarily through the implementation of customized
marketing and productivity improvement programs and the integration of
specialty service providers into its network, (ii) facilitate long-term patient
relationships by stressing professionalism and the provision of high quality
care, and (iii) recommend adjustments to the third-party payor mix at each
Managed Dental Center to maximize productivity and respond to local market
conditions. The key elements of its external expansion strategy are to: (i)
identify potential Managed Dental Centers which have the necessary
characteristics to excel in their specific local market, (ii) increase market
share in current markets by entering into Management Agreements with additional
high quality dental practices, and (iii) expand into new markets by entering
into Management Agreements with well-established practices that can serve as
platforms for further expansion into new markets.
INTERNAL GROWTH STRATEGY
/bullet/ INCREASE REVENUES AND OPERATING INCOME AT MANAGED DENTAL
CENTERS. The Company focuses on increasing revenues and operating income at
its Managed Dental Centers primarily through the implementation of
marketing programs and improvements in productivity and expansion into
specialty dental services. Dr. Steven R. Matzkin, the Company's Chairman of
the Board, President and Chief Executive Officer, has invested over 13
years developing a flexible and analytically driven management approach
which has been applied to a wide variety of dental practices, including
urban, suburban, start-up, mature, fee-for-service and managed care
practices. The Company uses this management approach to design and
implement an integrated marketing, staffing and scheduling program to
address the specific needs of each of its Managed Dental Centers. These
programs are designed to: (i) focus the Affiliated Dentists and dental
hygienists on the provision of high quality dental care; (ii) maximize
revenue per Managed Dental Center through the implementation of marketing,
case presentation, public relations and patient-calling programs; (iii)
increase market share by recruiting local dental specialists (such as
orthodontists, periodontists and oral surgeons) to be employed at the
Managed Dental Centers, thereby increasing total revenue per Managed Dental
Center and precluding the need to refer certain types of dental procedures
to third parties outside of the Company's network and (iv) increase the
capacity for patient flow through incremental efficiencies, training and,
if necessary, facility expansion. The Company closely monitors and analyzes
the financial and operational performance of each Managed Dental Center and
regularly makes refinements to each action plan. The Company believes that
its broad practice management experience and flexible management approach
favorably position the Company to capitalize on emerging trends in the
dental services industry and adapt to future industry changes.
/bullet/ FACILITATE LONG-TERM PATIENT RELATIONSHIPS. The Company believes
that its Managed Dental Centers can increase patient satisfaction and
retention by providing patients with high quality dental care at reasonable
fees. Accordingly, the Company stresses professionalism and quality care
from the entire staff at the Managed Dental Centers. The Company encourages
frequent training of its staff and Affiliated Dentists and other dental
professionals. The Company systematically tracks patient visits and
provides the Managed Dental Centers with detailed patient information to
assist them in their efforts to deliver consistently high quality care.
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<PAGE>
/bullet/ RECOMMEND ADJUSTMENTS TO THE THIRD-PARTY PAYOR MIX. The Company
recommends adjustments to a Managed Dental Center's patient mix among
individuals, public and private payors. The Company generally targets
fee-for-service revenues, which include fees paid by indemnity insurers and
direct patient billings, and supplements that with managed care contract
revenue. The Company closely monitors its Managed Dental Centers' payor
mixes in an effort to maximize the productivity of the Affiliated Dentists
and other dental professionals and the utilization of the facilities.
EXTERNAL EXPANSION STRATEGY
/bullet/ IDENTIFY POTENTIAL MANAGED DENTAL CENTERS. The Company targets
dental practices that have the characteristics necessary to excel in their
specific local markets. The Company initially reviews basic information on
each candidate practice, including location, revenue, payor mix, and number
of operatories and active patients. If the initial review indicates that
the practice merits additional consideration, the Company performs an
in-depth financial and operational analysis of the practice. As part of
this review, the Company uses analytical models that it has developed for
each practice type to evaluate the performance potential of the practice.
The Company examines the results of its analysis and considers other
qualitative factors to determine whether an affiliation would be mutually
beneficial.
/bullet/ INCREASE MARKET SHARE IN CURRENT MARKETS. The Company generally
seeks to expand in its current markets by adding high quality practices and
retaining the dentists who are currently employed in such practices. The
establishment of a concentrated network of affiliated dental care providers
in each of its markets enables the Company to leverage its marketing
efforts and infrastructure. The Company seeks to utilize its brand name
recognition and reputation to attract dental professionals to its network.
The Company also seeks to increase its market share by recruiting local
specialists (such as orthodontists, periodontists and oral surgeons) to
work with the Managed Dental Centers, thereby increasing total revenue per
Managed Dental Center and precluding the need to refer certain types of
dental procedures to third parties outside of the Company's network.
/bullet/ EXPAND INTO NEW MARKETS. The Company intends to utilize its
extensive experience in entering into Management Agreements with Managed
Dental Centers to selectively expand into new markets. The Company expects
to focus initially on contiguous areas in the Southeast and Midwest
regions. The Company has developed specific criteria consistent with its
approach to practice management for evaluating new markets. The Company
seeks to enter into Management Agreements with well-established practices
employing highly respected dental practitioners to achieve significant
market presence within a relatively short time frame, quickly understand
the new market and achieve the critical mass necessary to expand profitably
into the new market.
SERVICES AND OPERATIONS
The Company provides management and administrative services to the Managed
Dental Centers but does not provide dental care services. The Company provides,
supervises or facilitates financial, accounting, billing, training, efficiency
and productivity enhancement, recruiting, team building, marketing,
advertising, purchasing, collection and other services for the PAs and employs
the Managed Dental Centers' management and administrative personnel. The PAs
employ and maintain full control over the Affiliated Dentists, hygienists and
other dental professionals and set standards of care in order to promote the
provision of high quality dental care. The individual PAs are responsible for
compliance with state and local regulations of the practice of dentistry and
with licensing and certification requirements, and each PA is responsible for
acquiring and maintaining professional liability insurance. The Company's
services can be grouped into three broad categories: personnel services,
operational services and financial services.
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PERSONNEL SERVICES
TRAINING AND EDUCATION. The individual PAs employ, supervise and train all
dentists, dental hygienists and other dental professionals at each Managed
Dental Center. The Company, while not engaged in the practice of dentistry,
assists the individual PAs in training and educating professional personnel by
providing analyses that allow the PAs to determine training needs. All
personnel, other than dentists, dental hygienists and other dental
professionals, are supervised and trained by the Company or its subcontractor.
The Company also helps to coordinate group meetings and seminars at which the
PAs provide continuing education to their professionals. In addition, the
Company encourages and facilitates team building of the staffs through
regularly scheduled staff meetings and social events. Each individual PA
maintains full control over the practice of dentistry by the dental
professionals it employs and sets standards of practice in order to promote
quality dental care.
RECRUITING. The Company continually assists the PAs in recruiting dentists
to add to its network as Affiliated Dentists. Such recruiting takes place at
dental schools through the Company's contacts at such schools, at regional
dental conventions and through advertising in regional and national dental
publications. Recruitment of general dentists, specialists and other
professionals is the primary responsibility of the Company's Director of
Development.
HUMAN RESOURCE MANAGEMENT. The Company is responsible for the hiring,
retention, salary and bonus determination, job performance-related training and
other similar matters affecting Company employees, which include non-dental
professionals providing services to the PAs. Services provided by the Company
include (i) payroll administration, including recordkeeping, payroll
processing, making payroll tax deposits, reporting payroll, taxes and related
matters; (ii) risk management, including on-site safety inspections and
monitoring, training, and workers' compensation claim management and
administration; (iii) administering benefit plans; and (iv) the provision of
human resource materials, consulting and expertise on other human resource
issues. In Florida, a professional employer organization (the "Co-Employer")
assists the Company in providing these services. The Co-Employer arrangements
allow the Company to improve productivity and profitability by relieving it of
certain burdens associated with employee administration, helping it to manage
better certain employment-related risks, improving cash management with respect
to payroll-related expenses and enabling it to provide certain benefits on a
cost-effective basis. The Company intends to assume the responsibilities of the
Co-Employer when it becomes operationally efficient for it to do so. See
"Business--Employees."
OPERATIONAL SERVICES
MANAGEMENT INFORMATION SYSTEMS. The Company utilizes its information
systems to track data related to each Managed Dental Center's operations and
financial performance. Billing and collection information is compiled on a
daily basis, enabling the Company to monitor financial performance and
operational efficiency. The Company generates reports for each Managed Dental
Center containing information as to every visit, charge and procedure. These
reports are reviewed first by the Company's Chief Financial Officer and then by
the Operations Department which analyzes performance and efficiencies,
particularly the ratio of dollars per patient. These reports are also given to
the Dental Director who reviews them for inefficiencies and evaluates how
performance may be improved. The Company provides an analysis of these results
to the PAs and recommends specific measures to improve the financial
performance of the Managed Dental Centers. The analysis enables a Managed
Dental Center to improve its financial performance by making periodic
adjustments in marketing and operations. See "Risk Factors--Risks Associated
with Implementation of New Management Information Systems" for a discussion of
certain risks associated with the Company's implementation of new management
information systems.
QUALITY ASSURANCE. Prior to the execution of a Management Agreement with a
new PA, the Company evaluates the dental practice to determine in which areas,
if any, the proficiency level of the dental professionals employed by the PA
can be enhanced. The Company also works closely with the Dental Directors to
assure that quality dental services are being provided. While supervision of
dental
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services is the responsibility of the Dental Directors, the Company provides
Dental Directors with reports that help them evaluate performance. For example,
certain dental laboratories monitor the case quality of the Affiliated Dentists
in performing particular tasks. Such monitoring allows the Company and the PAs
to notify the appropriate Dental Director if any procedure is being done
inefficiently at a particular Managed Dental Center or by a particular
Affiliated Dentist or other dental professional. The Dental Director then works
directly with the dental professionals at the Managed Dental Center to identify
the reason for the inefficiency and to implement solutions, such as additional
training, to improve performance in that area. The Company also performs
patient surveys to monitor patient satisfaction, and the Dental Directors
periodically audit patient charts and provide advice to the general dentists
and dental specialists employed by the PAs. See "Business--Services and
Operations--Management Information Systems" and "--Dental Directors."
SCHEDULING. The Company implements patient scheduling systems at each of
the Managed Dental Centers. These systems enable the Company to devise daily
patient schedules that maximize the efficiency of the dental professionals.
Patient visits are scheduled in small time increments based upon the Company's
knowledge of the time required for each type of dental procedure. In addition,
the office hours of each Managed Dental Center are tailored to meet the needs
of its patient population. The Company believes that its scheduling systems
result in more efficient patient flow, thereby increasing productivity and
patient volume.
ADVERTISING AND MARKETING. The Company assists in developing and
implementing customized marketing plans tailored to the specific
characteristics of each Dental Center's market. Such marketing may include the
use of local radio, TV and print advertising, and other marketing promotions.
In some instances the Company seeks to promote brand name recognition of its
Managed Dental Centers through use of regional brand names. For example, in
Florida, several of the Company's Managed Dental Centers use the name "Advanced
Dental Care." In some cases, Dental Centers are marketed under the names used
by the practices prior to their affiliation with the Company to take advantage
of the practices' existing market position. Most states, including Florida and
Michigan, place certain restrictions on the ability of corporations such as the
Company to provide advertising and marketing services to the professional
associations or corporations organized in such states. See "Risk Factors--
Governmental Regulation--Advertising Restrictions."
PURCHASING AND DISTRIBUTION. The size of the Company's network enables the
Company to purchase dental supplies, laboratory services, equipment, insurance,
management information systems, advertising and office furniture at reduced
costs. Dental equipment supplies are obtained by the Company as directed by the
PAs and administrative supplies are purchased by the Company pursuant to
high-volume supply contracts with favorable price terms. The Company monitors
inventory levels and adjusts distribution to reduce carrying costs on
inventory.
FINANCIAL SERVICES
THIRD-PARTY PAYOR MANAGEMENT. The Company examines various factors to
determine which third-party payors' assignments it will recommend at each
Managed Dental Center. Factors considered by the Company in making this
recommendation include the types of procedures that are generally performed at
the Managed Dental Center, the geographic area served by the particular plan
and the demographic characteristics of the typical plan participants. Some
element of managed care is present at most Managed Dental Centers, although
generally not as the primary source of revenues. The Company assists the
Managed Dental Centers in the negotiation of contracts with third-party payors.
As a result of its size, the Company is often able to negotiate better terms
for its Managed Dental Centers with third party payors than would be available
to solo practitioners or small group dental practices.
ACCOUNTING SERVICES. The Company provides Managed Dental Centers with a
full range of accounting services, including preparation of financial
statements, management of accounts payable, oversight of accounts receivable,
verification of purchase orders, payroll administration and tax services. In
addition, the Company assists each Managed Dental Center in the preparation of
operating and financial budgets.
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THIRD-PARTY FINANCING. The Company has contracts with multiple
non-recourse third-party financing companies that enable the Managed Dental
Centers to offer various third-party financing options to their patients. At
the time a patient receives dental treatment and upon credit approval of the
patient by the third-party financing company, the PA is paid at varying
discounts to the full price of its services, based upon financing terms. The
financing company is subsequently responsible for all billing and collection
and has no recourse for payment against the Managed Dental Center.
DENTAL CENTER LOCATIONS
The following table lists the locations of the Company's Managed Dental
Centers and the dates on which Management Agreements between the PAs that own
each Managed Dental Center and the Company were first entered into.
<TABLE>
<CAPTION>
DATE OF
LOCATION MANAGEMENT AGREEMENT
-------- --------------------
<S> <C>
Sarasota, Florida .................. November 1993
Largo, Florida ..................... November 1993
Port Charlotte, Florida ............ November 1993
Englewood, Florida ............... March 1994
Fort Myers, Florida ............... October 1994
Sarasota, Florida .................. March 1995
Kissimmee, Florida ............... April 1995
Bradenton, Florida ............... July 1995
Orlando, Florida .................. June 1996
Tampa, Florida ..................... June 1996
Ocoee, Florida ..................... June 1996
Clearwater, Florida ............... June 1996
Tampa, Florida (North) ............ April 1997
Flint, Michigan .................. July 1997
Detroit, Michigan (Downtown) ...... July 1997
Detroit, Michigan (East) ......... July 1997
Detroit, Michigan (North) ......... July 1997
Westland, Michigan ............... July 1997
Tallahassee, Florida ............... August 1997
St. Petersburg, Florida ............ September 1997
</TABLE>
The following table lists the locations of the Company's Licensed Dental
Centers and the dates on which License Agreements between the PAs that own each
Licensed Dental Center and the Company were first entered into.
<TABLE>
<CAPTION>
DATE OF
LOCATION LICENSE AGREEMENT
- -------------------------------------- ------------------
<S> <C>
Orlando, Florida ............ September 1994
Deltona, Florida ............ September 1994
Winter Springs, Florida ...... October 1996
</TABLE>
MANAGEMENT AGREEMENTS
The Company has entered into Standard Management Agreements with 14 PAs
pursuant to which the Company or its assigns are the exclusive business
managers, to the extent allowable by law, of the associated Managed Dental
Centers. The Company plans to continue to use the Standard Management Agreement
to the extent possible as it enters into arrangements with additional dental
practices. However, the terms of future agreements may differ according to
market conditions and the statutory and regulatory requirements of the
particular state in which the dental practice is located. The Company has
entered into management agreements with respect to six additional dental
practices on
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terms different from those of the Standard Management Agreements. Descriptions
of these Management Agreements are set forth below.
Under the Standard Management Agreements, the Company provides
comprehensive administrative and business services and support to the PAs. The
Company, among other things, (i) assists in the identification of areas in
which the performance of the Managed Dental Centers and their dental
professionals can be improved to increase revenues and operating income, (ii)
provides, maintains and repairs all offices, equipment and furnishings, (iii)
employs all non-professional personnel necessary for the operation of the
Managed Dental Centers, (iv) provides payroll services, (v) implements standard
business systems and procedures and provides or facilitates systems and
efficiencies training, (vi) orders all general business inventory and supplies
required by the Managed Dental Centers and handles accounts payable, (vii)
establishes and maintains information systems and provides accounting and
bookkeeping services, (viii) monitors compliance with rules and regulations
applicable to the Managed Dental Center business, (ix) provides marketing
assistance and (x) provides assistance in billing and collections, all to the
extent permitted by law.
The Standard Management Agreements provide that the PAs are responsible
for, among other things, (i) employing and supervising all Affiliated Dentists
and dental hygienists, (ii) complying with all laws, rules and regulations
relating to Affiliated Dentists and dental hygienists, (iii) participating in
quality assurance/utilization review programs, (iv) maintaining proper dental
patient records, (v) obtaining and maintaining professional liability insurance
with limits of not less than $300,000 per claim and aggregate policy limits of
not less than $1.0 million and (vi) any other requirements to carry out the
practice of dentistry.
Under the terms of the Standard Management Agreements, the PAs are
required to indemnify, hold harmless and defend the Company from and against
any and all claims from negligent or intentional acts or omissions, including
the performance of dental services, by the PAs and their employees. The Company
is required to indemnify, hold harmless and defend the PAs from and against any
and all claims resulting from negligent or intentional acts or omissions by the
Company.
As compensation for its management services under the Standard Management
Agreements, the PAs pay the Company a management fee equal to 74% of the Net
Collected Revenues of the PA. The Company pays all of the operating and
nonoperating expenses incurred by the PAs except for (i) salaries and benefits
to the Affiliated Dentists and dental hygienists, (ii) licensing fees paid to
the Company, (iii) debt and asset carrying costs related to the acquisition of
the dental practice, and (iv) any other direct cost to the PA not covered under
the Standard Management Agreement.
The Standard Management Agreements have 25 year terms, with automatic
annual one year renewals thereof, and are terminable by either party for cause
or upon the insolvency of the other party. In the event of a material default
by the PA or the PA owner, the Company has the option to cause the sale of all
of the stock or all of the assets of the PA to a licensed dentist designated by
the Company. The PA or the PA owner may terminate the agreement without cause
provided the practice is sold to a dentist acceptable to the Company. The
Standard Management Agreements provide that they shall be amended by the
parties in the event of any regulatory matters affecting the validity of the
Standard Management Agreement in a manner necessary to bring the Standard
Management Agreements into compliance.
During the terms of the Standard Management Agreements, the Company and
the PAs agree not to disclose certain confidential and proprietary information
regarding the other. The PAs are required under the Standard Management
Agreements to use their best efforts to enter into and enforce written
employment agreements with each of their professional employees containing
covenants not to compete with the PA in a specified geographic area for a
specified period of time, generally from one to three years after termination
of the employment agreement. The employment agreements generally provide for
injunctive relief in the event of a breach of the covenant not to compete.
However, the Company's ability to enforce such covenants is uncertain. See
"Risk Factors--Non-Competition Covenants."
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<PAGE>
One PA in Florida is party to a Management Agreement substantially in the
same form as the Standard Management Agreement, except that (i) the PA pays the
Company a monthly management fee of 55% of its net profits (defined as total
collected revenues on a cash basis less any patient refunds and less practice
expenses, including nonprofessional staff expenses), and (ii) this agreement
expires in 2003. In addition, the agreement provides that the PA may, during
the period commencing on October 20, 1998 and ending 90 days thereafter,
terminate the agreement by paying to the Company an amount equal to $185,460
less the amount by which the aggregate fees paid to the Company pursuant to
such Management Agreement during either or both of the successive one year
periods following October 20, 1996 exceeds $100,000, and satisfying other
conditions set forth therein. At June 30, 1997, the aggregate amount of such
fees paid was approximately $103,000.
Another PA in Florida is party to a Management Agreement substantially in
the same form as the Standard Management Agreement, except that (i) the PA pays
to the Company a monthly management fee of 50% of its net profits (defined as
total collected revenues on a cash basis less any patient refunds and less
practice expenses, including non-professional staff expenses) and (ii) this
agreement expires in 2003.
In addition, in July 1997, the Company entered into a global Management
Agreement to manage four Managed Dental Centers in Michigan substantially in
the same form as the Standard Management Agreement, except that it expires in
July 2005. The Company subcontracts the day-to-day management functions of the
four Michigan Dental Centers subject to this agreement to an affiliate of the
owner of the applicable PAs. As a result, the Company pays a fee to such
subcontractor equal to 80% of the net profits of these Managed Dental Centers
(as defined in the Administrative Service Subcontract Agreement with such
subcontractor), after certain adjustments.
LICENSE AGREEMENTS
Each of the PAs has entered into a short form license agreement and each
of the professional associations which own the three Licensed Dental Centers
has entered into a long form license agreement with the Company (collectively,
the "License Agreements"). The long form license agreements generally have
terms of five years, with automatic five year renewal terms, while the short
form license agreements have terms that are coterminous with the related
Management Agreements. In consideration for a monthly license fee, generally
ranging from $600 to $1,200, the licensee is entitled to identify its Dental
Center as a member of the Company's network, participate in marketing programs,
utilize the Company's discounted purchasing capabilities, and use one or more
of the Company's service marks, logo types and commercial symbols
(collectively, the "Licensed Symbols"). The long form license agreements also
provide for a monthly advertising fee of $1,000 which, if collected would be
used for general marketing, advertising and promotion of the Company's network
and the Licensed Symbols. The Company has not collected any such monthly
advertising fees. The manner in which the licensee intends to use the Licensed
Symbols must be approved in advance by the Company.
The short form license agreements terminate immediately upon the
termination of the related Management Agreement, and termination is governed by
the provisions thereof. The Company may terminate the long form license
agreements upon cancellation of, or failure to renew, the lease for the
premises of the related Dental Center, the bankruptcy of the associated
licensee or upon the occurrence of certain other events set forth in the
License Agreement. The long form licensees may terminate their license
agreements for cause at any time or without cause during the 30-day period
commencing on the first anniversary of the execution of the agreement. Any
other termination by the long form licensee constitutes a breach of the
agreement.
DENTAL DIRECTORS
The Company divides the markets in which it operates into regions, each of
which is under the supervision of an Affiliated Dentist (each, a "Dental
Director"). Currently, there are four regions and four Dental Directors, each
employed by PAs within their region. The Company expects that additional
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<PAGE>
regions and Dental Directors will be added by the PAs as the Company enters
into Management Agreements with additional PAs in new markets.
The primary purpose of the Dental Directors is to promote the provision of
high quality dental care and to refine operating efficiencies at the Managed
Dental Centers. Dental Directors continually monitor and evaluate the
performance of the Affiliated Dentists and the Managed Dental Centers within
their region by identifying operational inefficiencies and implementing
solutions to address these inefficiencies. Each Dental Director performs
periodic spot checks in which the performance of each Managed Dental Center is
scrutinized in detail. The Dental Directors also assist the PAs in their region
with the hiring, training and supervision of dental professionals. The Company
believes that close relationships among the Dental Directors, the PAs they
supervise, and the Company allows for the identification of specific
inefficiencies, the quick remediation of such inefficiencies and the
realization of the benefits produced by the Company's management approach.
GOVERNMENTAL REGULATION
GENERAL OVERVIEW. The Company's operations and relationships are subject
to a variety of governmental and regulatory requirements relating to the
conduct of its business. The Company is also subject to laws and regulations
which relate to business corporations in general. The Company believes that it
exercises care in an effort to structure its practices and arrangements with
Dental Centers to comply with relevant federal and state law and believes that
such arrangements and practices comply in all material respects with all
applicable statutes and regulations. The health care industry and dental
practices are highly regulated, and there can be no assurance that the
regulatory environment in which the Company operates will not change
significantly and adversely in the future. In general, regulation of health
care providers and companies is increasing. See "Risk Factors--Governmental
Regulation."
There can be no assurance that the laws and regulations of the states in
which the Company operates or may desire to operate in the future will not
change or be interpreted in the future to restrict or adversely affect the
Company's relationships with Affiliated Dentists or the operation of Managed
Dental Centers. Proposals that may be introduced, could, if adopted, have a
material adverse effect on the Company's financial condition and results of
operations. It is uncertain what legislative programs, if any, will be adopted
in the future, or what actions Congress or state legislatures may take
regarding health care reform proposals or legislation.
Every state imposes licensing requirements on dentists and on their
facilities and services. In addition, many states require regulatory approval,
including certificates of need, before establishing certain types of health
care facilities, offering certain services or making expenditures in excess of
statutory thresholds for health care equipment, facilities or programs. The
execution of a management agreement with a dental practice does not in most
states require any health care regulatory approval on the part of the
management company or the dental practice. However, in connection with the
expansion of existing operations and the entry into new markets, the Company
and the Dental Centers may become subject to additional and more restrictive
regulation. See "Risk Factors--Governmental Regulation."
HEALTH CARE REGULATIONS AFFECTING THE COMPANY. Business arrangements
between dentists and business corporations that provide dental practice
management services are regulated extensively at the state and federal levels,
including regulation in the following areas:
CORPORATE PRACTICE OF DENTISTRY. The laws of many states prohibit
corporations that are not owned entirely by dentists from employing
dentists (and in some states, dental hygienists and dental assistants),
having control over clinical decision-making, or engaging in other
activities that are deemed to constitute the practice of dentistry. Florida
and Michigan law specifically prohibit non-professional corporations from
employing dentists and dental hygienists, exercising control over patient
records, and making decisions relating to clinical matters, office
personnel, hours of practice, pricing, credit, refunds, warranties and
advertising. Michigan law imposes similar
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<PAGE>
restrictions on the practice of dentistry by non-professional corporations.
Most states, including Florida and Michigan, also prohibit
non-professional corporations from owning, maintaining or operating an
office for the practice of dentistry. These laws have generally been
construed to permit arrangements under which the dentists are not employed
by or otherwise controlled as to clinical matters by the party supplying
facilities and non-professional services. Both Florida and Michigan law
require that dentists or their professional corporations maintain complete
care, custody and control of all equipment and materials used in the
practice of dentistry. The Management Agreements provide that the Company
shall not exercise control over any matters that would violate the
requirements of Florida or Michigan law, as applicable.
FEE-SPLITTING AND ANTI-KICKBACK LAWS. Many states also prohibit
"fee-splitting" by dentists with any party except other dentists in the
same professional corporation or practice entity. In most cases, these laws
have been construed as applying to the practice of paying a portion of a
fee to another person for referring a patient or otherwise generating
business, and not to prohibit payment of reasonable compensation for
facilities and services (other than the generation of referrals), even if
the payment is based on a percentage of the practice's revenues. The
Florida and Michigan fee-splitting laws prohibit paying or receiving any
commission, bonus, kickback, or rebate, or engaging in any split-fee
arrangement in any form with a dentist for patient referrals to dentists or
other providers of health care goods and services. In addition, Florida
regulations specifically require that fees paid to entities providing
management services to dental practices be at fair market value rates. The
Florida and Michigan courts have not considered whether the Florida and
Michigan fee-splitting statutes prohibit the payment by a dental practice
of a management fee that is based on a percentage of net income or whether
such a fee arrangement represents the fair market value of services
rendered. However, in considering a fee-splitting statute applicable to
chiropractors, a Florida court of appeals held that such statute does not
prohibit the payment of a management fee that is based on a percentage of
the gross income of the professional practice if the managing entity does
not make referrals to the chiropractic practice.
The Florida Board of Medicine is currently considering the issue of
whether a physician practice is permitted to enter into a management
agreement pursuant to which the managing entity earns a management fee
which includes a percentage of the practice's net income as consideration
for providing certain management and operational services, including
developing relationships with other physicians, hospitals and third party
payors. Although the Florida Board of Medicine's decision will not apply to
dental practices, a person may be more likely to petition the Board of
Dentistry seeking a determination as to the application of fee-splitting
restrictions to dentists in the event that the Board of Medicine determines
that the payment of management fees based on a percentage of net income
violates the fee-splitting provisions applicable to physicians. Pursuant to
the terms of the Management Agreements, in the event such a Management
Agreement were determined to be in violation of applicable law, the
agreement would have to be amended in a manner that complies with
applicable law and preserves, to the greatest extent possible, the economic
interests of the parties thereto.
In addition, most states 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. Such laws
would be violated and the Company could be materially adversely affected if it
were determined that the Affiliated Dentists make referrals to entities that
are related to the Company or its owners for the purpose of securing, directly
or indirectly, payments or other remuneration.
Federal law also prohibits the offer, payment, solicitation or receipt of
any form of remuneration in return for the referral of patients covered by
federally funded health care programs such as Medicaid, or in return for
purchasing, leasing, ordering or arranging for the purchase, lease or order of
any item or service that is covered by a federal program. The Company believes
that it operates in a manner that complies with these requirements. For this
reason, the Management Agreements provide that the Company will not engage in
direct marketing to potential sources of business, but will only assist the
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individual PAs in these endeavors by providing training, marketing materials
and technical assistance.
ADVERTISING RESTRICTIONS. Many states, including Florida and Michigan,
prohibit dentists from using advertising which includes any name other than
their own, or from advertising in any manner that is likely to lead a person to
believe that a non-dentist is engaged in the practice of dentistry. Florida law
also requires all advertising to identify the dentist who assumes total
responsibility for the advertisement and may not include the name of a person
who is neither actually involved in the practice of dentistry at the advertised
location nor an owner of the practice being advertised. In addition, Michigan
and Florida law impose additional restrictions on advertisements by
specialists.
LIMITATIONS ON DELEGATION. Most states, including Florida and Michigan,
regulate the manner in which dentists delegate certain tasks to non-dentists.
The laws described above provide for civil and criminal penalties for
their violation. These laws have been subject to limited judicial and
regulatory interpretation. They are enforced by regulatory agencies that are
vested with broad discretion in interpreting their meaning. The Company's
agreements and activities have not been examined by federal or state
authorities under these laws and regulations. For these reasons, there can be
no assurance that a review of the Company's business arrangements or the
operation of the Managed Dental Centers will not result in determinations that
adversely affect the Company's operations or that the long-term Management
Agreements or certain of their provisions will be held valid and enforceable.
In addition, these laws and their interpretation vary from state to state.
The laws and regulations of certain states into which the Company seeks to
expand may require the Company to change the form of relationships entered into
with dental professional associations or corporations in a manner that
restricts the Company's operations in those states.
ANTI-FRAUD LAWS. State and federal laws prohibit any person from
knowingly and willfully making any false statement or misrepresentation of
a material fact in seeking payment for items or services. In addition,
federal laws impose civil monetary penalties for filing claims that the
filing party "should know" are not appropriate under rules applicable to
federally funded health care programs.
SELF-REFERRAL LAWS. Many states, subject to certain exceptions, prohibit
referrals for certain health services if the referring dentist has an
ownership interest in, and/or a compensation arrangement with, the entity
receiving the referral. Many states require the dentist to disclose such
interests to patients.
Federal law, subject to certain exceptions, prohibits certain Medicare
and Medicaid referrals to entities in which a dentist has an ownership
interest or with which the dentist has a compensation arrangement.
Significant prohibitions against dentist self-referrals for services
covered by the Medicaid program was enacted, subject to certain exceptions,
by Congress in the Omnibus Budget Reconciliation Act of 1993. These
prohibitions, commonly known as Stark II, amended prior physician and
dentist self-referral legislation known as Stark I (which applied only to
clinical laboratory referrals) by dramatically enlarging the list of
services and investment interests to which the self-referral prohibitions
apply. Effective January 1, 1995, Stark II prohibits a physician or
dentist, or a member of his or her immediate family, from making referrals
for certain "designated health services" to entities in which the physician
or dentist has an ownership or investment interest, or with which the
physician or dentist has a compensation arrangement. "Designated health
services" include, among other things, clinical laboratory services,
radiology and other diagnostic services, radiation therapy services,
durable medical equipment, prosthetics, outpatient prescription drugs, home
health services and inpatient and outpatient hospital services. Stark II
prohibitions include referrals within the physician's or dentist's own
group practice (unless such practice satisfied the "group practice"
exception) and referrals in connection with the physician's or dentist's
employment arrangements with the PA (unless the arrangement satisfies the
employment
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exception). Stark II also prohibits billing the Medicaid program for
services rendered following prohibited referrals. Noncompliance with, or
violation of, Stark II can result in exclusion from the Medicaid program
and civil and criminal penalties. The Company believes that its operations
as presently conducted do not pose a material risk under Stark II,
primarily because the Company does not provide "designated health
services." Even if the Company were deemed to provide "designated health
services," the Company believes its activities would be protected under the
employment and group practice exceptions to Stark II. Nevertheless, there
can be no assurance that Stark II will not be interpreted or hereafter
amended in a manner that has a material adverse effect on the Company's
operations as presently conducted.
Stark II and most state self-referral laws have exceptions for in-office
services provided under the direct supervision of the dentist. In addition,
third party payor contracts may require dentists to provide an even greater
degree of supervision over certain in-office ancillary services in order to
permit the applicable PA to bill for such services. The Company believes
that its arrangements with Affiliated Dentists comply with these laws and
third party payor agreements. There is no assurance that changes in these
laws or their interpretation will not affect the Company's current or
future activities.
REGULATORY COMPLIANCE. The Company believes that health care regulations
will continue to change, and as a result, regularly monitors developments
in health care law. The Company expects to modify its agreements and
operations from time to time as the business and regulatory environment
change. However, there can be no assurance that any such change will not
adversely affect the ability of the Company to operate as it does currently
or to remain profitable in doing so.
INSURANCE
The Company's business entails inherent risk of liability. The Affiliated
Dentists and dental hygienists employed by the PAs are involved in the delivery
of health care services to the public and accordingly, such individuals, the
PAs and the Company are exposed to the risk of professional liability claims.
Claims of this nature, if successful, could result in substantial damage awards
to the claimants that may exceed the limits of any applicable insurance
coverage. Insurance against losses related to claims of this type can be
expensive and varies widely from state to state. The Company is indemnified
under the Management Agreements for claims against the Company arising from the
performance of medical and dental services provided by the PAs. Successful
malpractice claims, however, could have an adverse effect on the Company's
profitability. The PAs and the Affiliated Dentists and other dental
professionals they employ maintain professional liability insurance with limits
of not less than $300,000 per claim and with aggregate policy limits of not
less than $1 million per dentist. The Company is a named insured in most cases.
The Company does not maintain separate liability insurance. While the Company
believes that the foregoing provides adequate liability insurance coverage,
there can be no assurance 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 and on
favorable terms. See "Risk Factors--Risks of Providing Dental Services."
COMPETITION
The dental practice management segment of the dental services industry is
highly competitive and is expected to become increasingly competitive. The
primary bases of competition between dental practice management companies are
management expertise and experience, the elements of its operating strategy,
the opportunity for career enhancement of potential associated dentists and
other dental professionals, the size of the dental care network, the
sophistication of management information systems, liquidity, the terms of the
management agreements and name recognition. The Company currently competes with
other dental practice management companies in its existing markets, including
Coast Dental Services, Inc. in Florida. There are also a number of dental
practice management companies currently operating in other parts of the country
which may enter the Company's existing markets in the future. Many of such
competitors and potential competitors have substantially greater
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financial resources than the Company, have established large dental practice
networks, or otherwise enjoy competitive advantages which may make it difficult
for the Company to compete against them or enter into additional Management
Agreements on terms acceptable to the Company. In addition, as the Company
seeks to expand its operations into new markets, it is likely to face
competition from dental practice management companies which already have
established a strong presence in such markets.
The business of providing dental services is highly competitive in each of
the markets in which the Managed Dental Centers operate or in which operations
are contemplated. The primary bases of such competition are quality of care and
reputation, marketing exposure, convenience and traffic flow of location,
relationships with managed care entities, appearance and usefulness of
facilities and equipment, price of services and hours of operation. The
Affiliated Dentists compete with other dentists who maintain single or
satellite offices, as well as with dentists who maintain group practices,
operate in multiple offices or are members of competing dental practice
management networks. Many of those dentists have established practices and
reputations in their markets. In addition to competing against established
practices for patients, the Dental Centers compete with such practices in the
retention and recruitment of general dentists, specialists and hygienists to
staff the Dental Centers. If the availability of dentists begins to decline in
the Company's existing or targeted markets, it may become increasingly
difficult to attract and retain the dental professionals to staff the Dental
Centers. There can be no assurance that the Dental Centers will be able to
compete effectively with such other practices.
SERVICE MARKS
The Company has no registered service marks, trademarks, service names,
tradenames or logo.
EMPLOYEES
The Company has entered into an agreement with an unrelated third party
Co-Employer pursuant to which all of the Company's administrative and support
staff located in each Florida Managed Dental Center as well as the Company's
corporate office management and staff are co-employed. At September 30, 1997,
the Company co-employed 79 persons, consisting of 34 dental assistants, 37
dental office staff, and eight executive and administrative staff. In addition,
each of the Florida PAs has entered into an agreement with the Co-Employer
pursuant to which such PA and the Co-Employer co-employ all professional staff
(all co-employees of the Company and the PAs are referred to hereinafter as the
"Co-Employees"). At September 30, 1997, such PAs, in the aggregate, co-employed
32 dental professionals, consisting of 19 dentists and 13 dental hygienists.
The Company or the PAs, as the case may be, are responsible for the hiring,
retention, salary and bonus determination, job performance-related training and
other similar matters affecting Co-Employees while the Co-Employer is
responsible for (i) payroll administration, including recordkeeping, payroll
processing, making payroll tax deposits, reporting payroll, taxes and related
matters, (ii) risk management, including on-site safety inspections,
monitoring, training and workers' compensation claim management and
administration, (iii) administering benefit plans and (iv) human resource
consulting and expertise on other human resource issues. The agreements with
the Co-Employer are terminable by either party without cause on 30 days written
notice, or for cause on 24 hours written notice. At September 30, 1997, the
Company employed 29 non-professional staff in Michigan and the Company's
subcontractor employed 34 non-professional staff in the Detroit area Managed
Dental Centers. At September 30, 1997, the Michigan PAs employed 29 dental
professionals, consisting of 13 dentists and 16 dental hygienists. See
"Business--Services and Operations--Human Resource Management."
LITIGATION
There are no material pending legal proceedings involving the Company.
Affiliated Dentists and PAs are from time to time subject to malpractice
claims. To the Company's knowledge, there are no material malpractice claims
pending against any Affiliated Dentist or PA. Any such proceedings or claims,
if successful, could result in damage awards exceeding, perhaps substantially,
applicable insurance coverage. See "Risk Factors--Risks of Providing Dental
Services."
41
<PAGE>
PROPERTIES
The PAs, or in some cases the Company, presently lease between 1,200 and
10,000 square feet of office space for each of the Managed Dental Centers.
Rental payments for a leased Managed Dental Center range from approximately
$18,000 per annum to $144,000 per annum. The Company plans to continue to lease
rather than purchase space for the Managed Dental Centers to preserve the
Company's available capital. The Company intends to add Managed Dental Centers
to its network, which will result in additional office space under lease. See
"Certain Transactions."
The Company leases approximately 4,625 square feet of office space in
Sarasota, Florida for its corporate headquarters at an annual rental of
approximately $67,000. This lease expires in April 2002 and the Company
believes the facility is adequate for its current needs.
42
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The Company's executive officers and directors, their ages and positions
with the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- ----- --------
<S> <C> <C>
Dr. Steven R. Matzkin, DDS ...... 39 Chairman of the Board, Chief Executive Officer,
President and Director
Mr. Mitchell B. Olan ............ 38 Vice President, Chief Operating Officer and Director
Mr. David P. Nichols ............ 39 Chief Financial Officer
Dr. Oscar L. Hausdorff, DDS ...... 62 Director of Development
Mr. Curtis Lee Smith, Jr. ......... 70 Director
Mr. Robert F. Raucci ............ 42 Director
</TABLE>
The Company expects to add two additional non-employee directors to the
Board of Directors shortly after the consummation of this Offering.
DR. STEVEN R. MATZKIN founded the Company's predecessors in 1992 and 1993
and serves full-time as the Company's Chairman of the Board, Chief Executive
Officer and President. Dr. Matzkin has over 13 years of experience in the
administration and management of dental practices. He practiced dentistry in
Michigan for six years, during which time he owned five dental practices and
managed over 25 dental practices through an affiliate management company. Dr.
Matzkin has also been featured as a guest speaker at regional Practice
Management conferences, including the national meeting for the National
Association of Dental Plans. Dr. Matzkin earned his BA degree in 1980 from the
Indiana School of Biology and his DDS degree in 1984 from Northwestern
University.
MITCHELL B. OLAN has served as the Company's Vice President, Chief
Operating Officer, and as a director since 1994. From 1991 to 1994, Mr. Olan
served in various capacities, including area Vice President and Regional Vice
President at Optioncare Incorporated, a publicly traded national franchiser of
home infusion therapy businesses. From 1980 to 1990, Mr. Olan served in various
capacities including sales, sales management, general management and
administration with the ORMCO Division of Sybron Corporation. ORMCO is the
leading manufacturer and marketer of dental orthodontic appliances, equipment
and supplies. Mr. Olan earned a BS degree in Business Administration in 1980
from Indiana University School of Business.
DAVID P. NICHOLS has served as the Company's Chief Financial Officer since
February 1997. From October 1994 until February 1997, Mr. Nichols served as
Chief Financial Officer at BioDynamics International, a publicly traded company
in the business of processing bioimplants for tissue repairs. From May 1993
until October 1994, Mr. Nichols served as Vice President--Finance of
BioDynamics. He was also Managing Director, United States Operations, of
Biodynamics from March 1996 until February 1997. From June 1992 until May 1993,
Mr. Nichols served as Chief Financial Officer of KiMed Corporation, a medical
device company. Prior to joining the Company, Mr. Nichols had over sixteen
years experience in the health care field. He served as Chief Financial Officer
of the long term care division of Trizec Corporation, Ltd., and was in public
accounting with the audit divisions of Price Waterhouse LLP and Deloitte &
Touche LLP. Mr. Nichols earned his BS Degree from the University of Florida in
1979 and a masters degree in Accounting from the University of Florida in 1980.
He is a Certified Public Accountant and a Certified Management Accountant.
DR. OSCAR L. HAUSDORFF has served as the Company's Director of Development
since 1996. From 1988 to 1995, he served as President, Chief Operating Officer
and as a director of Princeton Dental Management Corporation, a publicly traded
dental practice management company. From 1977 to 1988,
43
<PAGE>
Dr. Hausdorff held positions in sales, sales management, training, development
and recruiting for various firms in the stock brokerage business. From 1960 to
1977, Dr. Hausdorff practiced General Dentistry and Orthodontics in New York.
In addition, he was an instructor in Post-Graduate orthodontics at New York
University from 1960 to 1965. Dr. Hausdorff earned a DDS degree from New York
University in 1958, and a post graduate degree in Orthodontics from New York
University in 1964.
CURTIS LEE SMITH, JR. has been a director of the Company since 1996.
Beginning in 1986, Mr. Smith served as Chairman of the Board and Chief
Executive Officer of Handex Corporation ("Handex"), an environmental consulting
and remediation company which became a public company in 1989. Handex acquired
New Horizons Computer Learning Centers, a software training company, in 1994.
Handex sold its environmental division in 1996 and now operates as New Horizons
Worldwide, of which Mr. Smith serves as Chairman of the Board and Chief
Executive Officer.
ROBERT F. RAUCCI has been a director of the Company since 1996. Mr. Raucci
has been a managing member of Newlight Management, LLC, a technology oriented
venture capital fund, since July 1997. Mr. Raucci also has served as president
of RAM Investment Corporation, a venture capital investment and advisory
company, since 1994. Between 1985 and 1994 Mr. Raucci served as a private
equity investment manager for Alliance Capital Management Corporation, a global
investment management company.
DIRECTORS' COMPENSATION
The Company pays all directors who are not employees of the Company $350
for each Board meeting and each Board Committee meeting attended. The Company
also reimburses directors for all travel-related expenses incurred in
connection with their activities as directors.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company currently has two committees of the Board, the Audit Committee
and the Compensation Committee. Messrs. Smith and Raucci will initially serve
on the Company's Audit Committee. The Audit Committee's functions include
recommending to the Board of Directors the engagement of the Company's
independent certified public accountants, reviewing with such accountants the
plan and results of their audit of the financial statements and determining the
independence of such accountants. In addition, Messrs. Smith and Raucci will
initially serve on the Company's Compensation Committee, which reviews and
makes recommendations with respect to compensation of officers and key
employees, including the grant of options or other benefits under the Omnibus
Plan.
44
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company during
the past fiscal year to the Chief Executive Officer and the other most highly
paid executive officer who was serving as an executive officer at the end of
1996 and whose compensation exceeded $100,000 (collectively, the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------------- ----------------
NUMBER OF
OTHER ANNUAL SECURITIES
SALARY BONUS COMPENSATION(1) UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) OPTIONS COMPENSATION(2)
- ---------------------------------- ------ ---------- ------- ----------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Steven R. Matzkin, DDS 1996 $200,000 -- -- -- --
Chairman of the Board,
Chief Executive Officer and
President(2)
Mitchell B. Olan 1996 $126,000 -- -- -- --
Vice President, Chief Operating
Officer and Director(2)
</TABLE>
- ----------------
(1) The aggregate amount of perquisites and other personal benefits provided to
such Named Executive Officer is less than 10% of the total annual salary
and bonus of such officer.
(2) See "Management--Employment Agreements" for information regarding current
and future compensation arrangements.
EMPLOYMENT AGREEMENTS
The Company has entered into Employment Agreements with Dr. Steven R.
Matzkin, Chairman of the Board, Chief Executive Officer and President of the
Company, Mitchell B. Olan, Vice President and Chief Operating Officer of the
Company, and David P. Nichols, Chief Financial Officer of the Company. The
Employment Agreements of Messrs. Matzkin and Olan were entered into as of
October 25, 1996, and are for terms of five years and four years, respectively.
The Employment Agreement of Mr. Nichols was entered into as of January 1997 and
is for a term of four years. These agreements provide for annual base salaries
to Messrs. Matzkin, Olan and Nichols of $200,000, $120,000 and $120,000,
respectively, subject to increase at the Company's discretion. It is
anticipated that the Board will approve an amendment to the respective
employment agreements of Dr. Matzkin, Mr. Olan and Mr. Nichols pursuant to
which they will be entitled to receive 60%, 25% and 15%, respectively, of an
annual bonus pool which is equal to 50% of the Company's net income in excess
of the Company's budgeted net income for each year. Bonuses paid to Dr.
Matzkin, Mr. Olan and Mr. Nichols in any year may not exceed $200,000,
$100,000, and $50,000, respectively. Dr. Matzkin's, Mr. Olan's and Mr. Nichols'
employment agreements entitle them to participate in any Company stock option
plan at a level commensurate with their positions. Mr. Olan's employment
agreement entitled him to warrants to purchase 163,080 shares of common stock
for an aggregate exercise price of $272,768. These warrants were exercised in
February 1997. Upon the Company's constructive discharge of Dr. Matzkin or
termination of the employment of Dr. Matzkin without cause, as specified in his
employment agreement, Dr. Matzkin shall be entitled to receive his base salary
for the period commencing on the effective date of the termination and ending
on the later to occur of (x) the second anniversary of the date of termination
or (y) the end of the five-year term of the employment agreement. Upon the
Company's termination of Mr. Olan without cause, as specified in his employment
agreement, Mr. Olan shall be entitled to receive his base salary for the period
commencing on the date of termination and ending on the date nine months
thereafter. Upon the Company's termination of Mr. Nichols without cause as
specified in his employment agreement, Mr. Nichols shall be entitled to receive
his base salary for the period commencing on the date of termination and ending
on the date six months thereafter. Upon termination with cause or voluntary
termination of either Dr. Matzkin, Mr. Olan or Mr. Nichols, such executive
shall be entitled to receive his base salary through the effective date of such
termination.
45
<PAGE>
Dr. Matzkin's employment agreement also provides that upon termination of
his employment for any reason, if the Company's securities are then publicly
traded, Dr. Matzkin has the right to request that the Company register, as
expeditiously as possible, any or all of the Common Stock then owned by Dr.
Matzkin, including all shares of Common Stock issuable pursuant to any
derivative securities of the Company then held by Dr. Matzkin.
OMNIBUS EXECUTIVE INCENTIVE COMPENSATION PLAN
The Company has adopted, effective upon consummation of this Offering, the
Omnibus Plan, which is designed to assist the Company in attracting,
motivating, retaining and rewarding key officers, directors and independent
contractors (collectively, the "Participants") by enabling the Participants to
acquire or increase an ownership interest in the Company, as well as providing
the Participants with annual and long term performance incentives to expend
their maximum efforts in the creation of stockholder value. Pursuant to the
terms of the Omnibus Plan the Company may grant Participants stock options,
stock appreciation rights, restricted stock, deferred stock, other
stock-related awards and performance or annual incentive awards that may be
settled in cash, stock or other property (collectively, the "Awards"). The
Company's compensation committee, or in the absence thereof the Board of
Directors (the "Committee"), will administer and interpret the Omnibus Plan and
is authorized to grant Awards thereunder to all eligible Participants.
Under the Omnibus Plan, the total number of shares of Common Stock that
may be subject to the granting of Awards during the term of the Omnibus Plan
shall be equal to 250,000 shares, plus the number of shares with respect to
Awards previously granted under the Omnibus Plan that terminate without being
exercised, and the number of shares of Common Stock that are surrendered in
payment of any Awards or any tax withholding requirements. The following is a
description of the Awards that may be granted under the Omnibus Plan:
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS. The Committee is authorized
to grant stock options, including both incentive and non-qualified stock
options, and stock appreciation rights ("SAR") entitling the Participant to
receive the amount by which the fair market value of a share of Common Stock on
the date of exercise exceeds the grant price of the SAR. The exercise price per
share subject to an option and the grant price of an SAR are determined by the
Committee, but, in the case of incentive stock options, must not be less than
the fair market value of a share of Common Stock on the date of grant. Each
option is exercisable after the period or periods specified in the related
option agreement, but no option may be exercisable after the expiration of ten
years from the date of grant. Incentive stock options granted to an individual
who owns (or is deemed to own) at least 10% of the total combined voting power
of all classes of stock of the Company must have an exercise price of at least
110% of the fair market value of the Common Stock on the date of grant and a
term of no more than five years. Options may be exercised by payment of the
exercise price in cash, shares of Common Stock, outstanding Awards or other
property having a fair market value equal to the exercise price, as the
Committee may determine from time to time. At or shortly after consummation of
the Offering, options to purchase 66,000 shares will be granted under the
Omnibus Plan at the Offering price.
RESTRICTED AND DEFERRED STOCK. The Committee is authorized to grant
restricted stock and deferred stock. Restricted stock is a grant of shares of
Common Stock which may not be sold or disposed of, and which may be forfeited
in the event of termination of employment, prior to the end of a restricted
period specified by the Committee. A Participant granted restricted stock
generally has all the rights of a shareholder of the Company, unless otherwise
determined by the Committee. An Award of deferred stock confers upon the
Participant the right to receive shares of Common Stock at the end of a
specified deferral period, subject to possible forfeiture of the Award in the
event of termination of employment prior to the end of a specified restricted
period. Prior to the issuance of shares of Common Stock, an Award of deferred
stock carries no voting or dividend rights.
BONUS STOCK AND AWARD IN LIEU OF CASH OBLIGATIONS. The Committee is
authorized to grant shares of Common Stock as a bonus, free of restrictions, or
to grant shares of Common Stock or other Awards in lieu of cash under the
Omnibus Plan, subject to such terms as the Committee may specify.
46
<PAGE>
OTHER STOCK-BASED AWARDS. The Committee is authorized to grant Awards
that are denominated or payable in, valued by reference to, or otherwise based
on or related to, shares of Common Stock. Such Awards might include convertible
or exchangeable debt securities, other rights convertible or exchangeable into
shares of Common Stock, purchase rights for shares of Common Stock, Awards with
value and payment contingent upon performance by the Company or any other
factors designated by the Committee, and Awards valued by reference to the book
value of shares of Common Stock or the value of securities of or the
performance of specified subsidiaries or business units. The Committee
determines the terms and conditions of such Awards.
The right of a Participant to exercise or receive a grant or settlement of
an Award, and the timing thereof, may be subject to such performance conditions
(including subjective individual goals) as may be specified by the Committee.
In addition, the Omnibus Plan authorizes specific annual incentive Awards,
which represent a conditional right to receive cash, shares of Common Stock or
other Awards upon achievement of certain preestablished performance goals and
subjective individual goals during a specified fiscal year.
Awards may be settled in the form of cash, shares of Common Stock, other
Awards or other property in the discretion of the Committee. The Committee may
condition any payment relating to an Award on the withholding of taxes and may
provide that a portion of any shares of Common Stock or other property to be
distributed will be withheld (or previously acquired shares of Common Stock or
other property surrendered by the Participant) to satisfy withholding and other
tax obligations. Awards granted under the Omnibus Plan generally may not be
pledged or otherwise encumbered and are not transferable except by will or by
the laws of descent and distribution, or to a designated beneficiary upon the
Participant's death, except that the Committee may, in its discretion, permit
transfers for estate planning or other purposes subject to any applicable
restrictions.
NON-QUALIFIED STOCK OPTION PLAN
The Company is adopting, effective upon consummation of this Offering, the
1997 Non-Qualified Plan pursuant to which shares of Common Stock are currently
reserved for issuance upon exercise of options. The Non-Qualified Plan is
designed as a means to help PAs with which the Company has entered into
Management Agreements attract (i) dentists who practice at Dental Centers owned
by such PAs, (ii) owners of PAs and (iii) dental health care specialists
employed by one or more of the PAs. The Company's Board of Directors,
administers and interprets the Non-Qualified Plan and is authorized to grant
options thereunder to the foregoing persons. Options granted under the Non-
Qualified Plan are on such terms and at such prices as determined by the Board.
Each option is exercisable after the period specified in the option agreement,
but no option may be exercisable after the expiration of ten years from the
date of grant. The Non-Qualified Plan will terminate in ten years unless sooner
terminated by the Board. The Non-Qualified Plan also authorizes the Company to
make or guarantee loans to optionees to enable them to exercise all or a
portion of their options. If the exercise price is paid in whole or part with a
promissory note, such note shall (i) provide for full recourse to the optionee,
(ii) be collateralized by the pledge of the shares that the optionee purchases
upon exercise of such option, (iii) bear interest at the prime rate of the
Company's principal lender and (iv) contain such other terms as the Board of
Directors, in its sole discretion, shall reasonably require. The Board of
Directors has the authority to amend or terminate the Non-Qualified Plan,
provided that no such amendment may impair the rights of the holder of any
outstanding option without the written consent of such holder, and provided
further that certain amendments of the Non-Qualified Plan are subject to
shareholder approval. Options to purchase 425,000 shares of Common Stock will
be authorized for issuance under the Plan. At the date of consummation of the
Offering, options to purchase an aggregate of 135,000 shares of Common Stock
will be outstanding under the Non-Qualified Plan at an exercise price equal to
the initial public offering price The exercise price of the shares of Common
Stock available for future grants under the Non-Qualified Plan shall be
determined by the Board of Directors.
47
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information concerning the
beneficial ownership of the Common Stock as of September 30, 1997 after giving
effect to the Stock Split, and the conversion of the Series A Preferred Stock,
and as adjusted to reflect the sale of 2,000,000 shares of Common Stock by the
Company, and the sale of 300,000 shares of Common Stock by the Selling
Stockholders if the over-allotment option is exercised in full, by (i) each
person known by the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock, (ii) each of the Selling Stockholders, (iii) each
director of the Company, (iv) each of the Named Executive Officers and (v) all
executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
PERCENT SHARES BENEFICIALLY
BENEFICIALLY NUMBER OF OWNED AFTER OFFERING
OWNED AFTER SHARES BEING IF OVER-ALLOTMENT
SHARES BENEFICIALLY OWNED OFFERING IF OFFERED OPTION IS EXERCISED
PRIOR TO THE OFFERING OVER-ALLOTMENT SUBJECT TO IN FULL
NAME OF --------------------------- OPTION IS NOT OVER-ALLOTMENT ----------------------
BENEFICIAL OWNER(1) NUMBER PERCENT EXERCISED OPTION NUMBER PERCENT
- -------------------------------- --------------- --------- ---------------- --------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Dr. Steven R. Matzkin(2) ...... 1,630,800 33.3% 23.6% 101,652 1,529,148 22.2%
SRM '93 Children's Trust ...... 1,630,800 33.3% 23.6% 101,652 1,529,148 22.2%
Curtis Lee Smith, Jr. ......... 530,010 10.8% 7.7% 33,037 496,973 7.2%
Robert F. Raucci ............... 21,812(3) * * 1,360 20,452 *
Mitchell B. Olan ............... 163,080 3.3% 2.4% 10,165 152,915 2.2%
Crescent International
Holdings Limited ............ 632,547 12.9% 9.2% 39,428 593,119 8.6%
Dr. Dennis Corona ............ 99,311 2.0% 1.4% 5,083 94,228 1.4%
Dr. Richard Golden ............ 81,540 1.7% 1.2% 5,083 76,457 1.1%
Frank Wolicki .................. 40,770 * * 2,540 38,230 *
All Executive Officers and
Directors as a group
(five persons)(2)(3)(5) ...... 2,395,278 48.4% 34.5% 146,214 2,249,064 32.4%
</TABLE>
- --------------
* Less than 1%.
(1) Unless otherwise indicated, the address of each of the beneficial owners
identified is 1343 Main Street, 7th Floor, Sarasota, Florida 34236.
(2) Excludes 1,630,800 shares held by the SRM '93 Children's Trust, which has
been established for the benefit of Dr. Matzkin's children. Dr. Matzkin
exercises no control over such trust and disclaims any beneficial interest
in such shares.
(3) Excludes 632,506 shares held by Crescent International Holdings Limited
("CIHL"). Mr. Raucci's spouse is the President and a director of certain
companies under common control with CIHL. Mr. Raucci disclaims beneficial
ownership of such shares.
(4) Includes 17,771 shares of Common Stock (assuming an initial public offering
price of $12.00 per share) which may be issued upon exercise of currently
exercisable options.
(5) Includes 49,576 shares of Common Stock which may be issued upon exercise of
currently exercisable options held by David Nichols.
48
<PAGE>
CERTAIN TRANSACTIONS
In 1993, Dr. Matzkin sold four dental practices in Michigan to Dr. David
Ross Johnson, a Dental Director, for a $237,000 note under which payments
commenced in May 1997. In connection with that sale Profit, a corporation
controlled by Dr. Matzkin, agreed to provide consulting services to these
practices for $18,000 per month until May 1997 and $15,000 per month thereafter
through May 2005. In July 1997, the Company purchased the right to manage these
practices for $846,000 and entered into a global management agreement pursuant
to which it will provide management services to these practices until 2005. The
Company subcontracted the day-to-day management services to an affiliate of Dr.
Johnson, but retains most other management functions for which it retains 20%
of net profits of these practices, after certain adjustments, and Dr. Johnson's
affiliate is paid 80% of such net profits. The Company also receives $800 per
month from each practice as a licensing fee. The Company is currently
considering the acquisition of the capital stock of Profit, a corporation
controlled by Dr. Matzkin. It is anticipated that such acquisition will not
happen prior to 1998 and will be consummated only upon approval of the outside
members of the Board of Directors.
In July 1997, the Company entered into a Management Agreement with a PA in
Michigan which was controlled by Dr. Steven Matzkin, the Company's President,
Chief Executive Officer and Chairman of the Board. As of September 30, 1997,
Dr. Matzkin assigned the ownership of the capital stock and all rights relating
thereto to Dr. David Ross Johnson in consideration for Dr. David Ross Johnson's
assumption of all obligations to pay for such capital stock and all obligations
relating to such capital stock.
Certain of the Managed Dental Centers lease their office facilities from
entities controlled by Dr. Matzkin. Such leases terminate at various times
between 2000 and 2004. Managed Dental Centers and the Company paid rent
pursuant to the leases in the aggregate amounts of $77,671, $87,756 and
$108,110, in 1994, 1995 and 1996, respectively. Dr. Matzkin also owns certain
dental laboratories that perform laboratory services for the Managed Dental
Centers, primarily relating to the making of prostheses. In 1996 the amount
paid by the Managed Dental Centers to such laboratories was $145,000 of which
$60,000 was advanced by the Company and remains outstanding at December 31,
1996. Dr. Matzkin owns 33.3% of the capital stock of Equipment Management
Services, an equipment leasing company ("EMS"). Three Managed Dental Centers
have entered into capitalized equipment leases with EMS, with the aggregate
original principal amount of such leases being $122,000. Amounts paid by such
Managed Dental Centers to EMS pursuant to such leases aggregated approximately
$124,000 and $140,000 in 1995 and 1996, respectively. The Company believes that
such arrangements are no less favorable to such Managed Dental Centers than
could have been obtained in arms-length transactions with unrelated third
parties. In addition, Dr. Matzkin has personally guaranteed an aggregate of
approximately $3.3 million of indebtedness of certain of the Managed Dental
Centers and an aggregate of approximately $100,000 of indebtedness of the
Company. The Company is currently negotiating with the lenders to whom Dr.
Matzkin has given such guarantees to release Dr. Matzkin from his obligations
thereunder and to cause the Company to guaranty such obligations.
Pursuant to a Stockholders' Agreement (the "Stockholders' Agreement")
among the Company and Dr. Matzkin, Mr. Smith, Mr. Raucci, the SRM 1993
Children's Trust and CIHL (collectively, the "Stockholders") initially entered
into in connection with the sale of the Company's Series A Preferred Stock in
October 1996, each Stockholder received (i) "piggyback" registration rights,
(ii) a right of first refusal with respect to a greater than 50% share transfer
by a Stockholder prior to a Qualified Initial Public Offering (as defined in
the Stockholders' Agreement), (iii) co-sale rights to participate on a pro rata
basis in certain resales of Common Stock by other Stockholders (other than in
connection with a Qualified Initial Public Offering) and (iv) participation
rights with respect to certain issuances of securities by the Company made
prior to a Qualified Initial Public Offering. This Offering constitutes a
"Qualified Initial Public Offering" as defined in the Stockholders' Agreement.
In addition, stockholders who are also directors of the Company, other than Dr.
Matzkin, also were granted demand registration rights under the Stockholders'
Agreement. Mitchell B. Olan has been granted certain "piggyback" registration
rights with respect to an aggregate of 163,080 shares of Common Stock pursuant
to an
49
<PAGE>
agreement with the Company. Pursuant to Dr. Matzkin's employment agreement,
upon termination of his employment for any reason, if the Company's securities
are then publicly traded, Dr. Matzkin has the right to request that the Company
register any or all of the Common Stock then owned by Dr. Matzkin. See
"Description of Capital Stock--Registration Rights."
For information regarding employment agreements with certain executive
officers and directors, see "Management--Employment Agreements."
The Company has adopted a policy whereby all transactions between the
Company and one or more of its affiliates must be approved in advance by a
majority of the Company's disinterested directors.
50
<PAGE>
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
Upon consummation of the Offering, the authorized capital stock of the
Company will consist of fifty million shares of common stock, par value $0.01
per share (the "Common Stock"), and five million shares of preferred stock, par
value $0.01 per share (the "Preferred Stock"). After giving effect to the Stock
Split, and the mandatory conversion of all outstanding shares of the Company's
Series A Preferred Stock into 654,359 shares of Common Stock (post-Stock Split)
to be effected prior to or simultaneously with the effective date of this
Offering, an aggregate of 6,897,700 shares of Common Stock will be outstanding.
See "Principal and Selling Stockholders." No shares of Preferred Stock will be
outstanding. The following description of the Company's capital stock does not
purport to be complete and is qualified in its entirety by reference to the
General Corporation Law of the State of Delaware as amended from time to time
("Delaware Law") and the Certificate and Bylaws, which are filed as exhibits to
the Registration Statement of which this Prospectus forms a part.
COMMON STOCK
The holders of the Common Stock are entitled to one vote per share of
record on all matters to be voted upon by stockholders and to vote together as
a single class for the election of directors and in respect of other corporate
matters. At a meeting of stockholders at which a quorum is present, for all
matters other than the election of directors, a majority of the votes cast
decides all questions, unless the matter is one upon which a different vote is
required by express provision of law or the Certificate or Bylaws. Directors
will be elected by a plurality of the votes of the shares present at a meeting.
There is no cumulative voting with respect to the election of directors (or any
other matter).
The holders of Common Stock have no preemptive rights and have no rights
to convert their Common Stock into any other securities. Subject to the rights
of holders of Preferred Stock, if any, in the event of a liquidation,
dissolution or winding up of the Company, holders of Common Stock are entitled
to participate equally and ratably in all assets remaining after payment of
liabilities and distribution of any preferential amount.
The holders of Common Stock are entitled to receive ratably such dividends
as the Board of Directors may declare out of funds legally available therefor,
when and if so declared, subject to any preference in favor of outstanding
shares of preferred stock, if any. The payment by the Company of dividends, if
any, rests within the discretion of its Board of Directors and will depend upon
the Company's results of operations, financial condition and capital
expenditure plans, as well as other factors considered relevant by the Board of
Directors.
PREFERRED STOCK
Upon completion of the Offering, no shares of Preferred Stock will be
outstanding. The Board of Directors of the Company, without further action by
the stockholders, will be authorized to issue up to 5 million shares of
Preferred Stock in one or more series and to fix and determine as to any series
all the relative rights and preferences of shares in such series, including,
without limitation, relative voting, dividend, redemption, liquidation,
conversion and other powers, preferences, rights, qualifications and
limitations. 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 that some, or a majority, of the stockholders might
believe to be in the best interests of the Company or in which stockholders
might receive a premium for their stock over the then market price of such
stock. In addition, under certain circumstances, the issuance of Preferred
Stock could adversely affect the voting power of the holders of the Common
Stock.
In October and December 1996, the Company issued an aggregate of 15,000
shares of Series A Preferred Stock. Holders of Series A Preferred Stock are
entitled to an annual dividend of $8.00 per
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share of Series A Preferred Stock. In addition, the Certificate of Designation
provides for the mandatory conversion of the Series A Preferred Stock upon the
Company's entering into a public offering of securities. Accordingly, upon
consummation of the Offering, the outstanding Series A Preferred Stock will be
converted into 654,359 shares of Common Stock and no Series A Preferred Stock
will be outstanding.
WARRANTS AND OPTIONS TO PURCHASE COMMON STOCK
Upon consummation of the Offering, the Company is to issue to Mr. Lavelle,
the sole stockholder of Nassau, a five-year warrant to purchase that number of
shares of Common Stock equal to $350,000 divided by the offering price of
shares of Common Stock in this Offering, at an exercise price equal to the
offering price and a one-year warrant to purchase 53,001 shares of Common Stock
at an aggregate exercise price of $92,355. Also, David P. Nichols, the
Company's Chief Financial Officer, has a free-standing option to purchase
49,576 shares of Common Stock at a purchase price of $1.53 per share. Upon
consummation of the Offering, options to purchase 66,000 shares will be
outstanding under the Omnibus Plan and options to purchase 135,000 shares will
be outstanding under the Non-Qualified Plan. Finally, the Company granted two
options to Dr. Corona, effective April 1, 1997 and August 21, 1997, to purchase
an aggregate of 17,771 shares of Common Stock at $12.00 per share (assuming an
initial public offering price of $12.00 per share). The options granted to Dr.
Corona expire six months after consummation of the Offering. See
"Management--Omnibus Executive Incentive Compensation Plan."
REGISTRATION RIGHTS
At any time after nine months following the consummation of the Offering,
any of Messrs. Smith or Raucci or CIHL may demand, on any one occasion, that
the Company register, as expeditiously as possible, any or all of the Common
Stock then owned by such stockholder, including all shares of Common Stock
issuable pursuant to any derivative securities then held by such stockholder.
In addition, Mr. Raucci and CIHL may demand, on any one occasion, that the
Company register their Common Stock on Form S-2 or Form S-3, if available. In
the event that the Company intends to register any of its Common Stock,
including pursuant to any such request, the Company must notify the foregoing
stockholders of such registration and offer to include therein the shares held
by such stockholders. The Company has agreed to indemnify the foregoing
stockholders against liabilities under the Securities Act in certain
circumstances in connection with any such registration statement.
Mitchell B. Olan, Nassau and Mr. Lavelle have been granted certain
"piggyback" registration rights with respect to an aggregate of 247,882 shares
of Common Stock purchased or purchasable pursuant to equity holders agreements
between the Company and such persons. Such rights, subject to certain
limitations, may be exercised at any time following the Offering in the event
that the Company proposes to register any shares of Common Stock under the
Securities Act on Form S-1, S-2 or S-3 or any similar successor forms, whether
or not for its own account. The Company has agreed to indemnify the
stockholders against liabilities under the Securities Act in certain
circumstances in connection with any such registration statement.
Dr. Matzkin's employment agreement provides that upon termination of his
employment for any reason, if the Company's securities are then publicly
traded, Dr. Matzkin has the right to request that the Company register, as
expeditiously as possible, any or all of the Common Stock then owned by Dr.
Matzkin, including all shares of Common Stock issuable pursuant to any
derivative securities then held by Dr. Matzkin. The Company has agreed to
indemnify Dr. Matzkin against liabilities under the Securities Act in certain
circumstances in connection with any such registration statement.
INDEMNIFICATION
Under the Certificate, the Company may indemnify, to the full extent
permitted by Delaware law, its directors, officers, employees and agents who
are a party, or are threatened to be made a party, to an
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action or proceeding, by reason of the fact that the person serves or served
the Company as a director, officer, employee or agent. The Company also is
authorized to purchase insurance and enter into indemnification agreements. The
Company is entering into indemnification agreements with its executive officers
and directors and may purchase directors' and officers' liability insurance
coverage on their behalf. The Certificate also eliminates the liability of
directors and officers to the Company or its stockholders for monetary damages
for breach of fiduciary duty except to the extent such exemption from liability
or limitation thereof is not permitted under applicable law. The Company
believes that these provisions of the Certificate and the Bylaws are necessary
to attract and retain qualified persons as directors and officers. These
provisions do not eliminate the duty of care or loyalty and, in appropriate
circumstances, equitable remedies such as injunctive or other forms of
non-monetary relief will remain available under Delaware law. In addition, each
director continues to be subject to liability for monetary damages for acts or
omissions involving breach of the duty of loyalty, acts or omissions not in
good faith, intentional misconduct, knowing violations of law, unlawful
distributions and any transaction from which the director derived an improper
personal benefit.
PROVISIONS WITH POSSIBLE ANTITAKEOVER EFFECT
Certain provisions of Delaware Law and of the Certificate and the Bylaws,
summarized in the following paragraphs, may be considered to have an
anti-takeover effect and may delay, deter or prevent a tender offer, proxy
contest or other takeover attempt that a stockholder might consider to be in
such stockholder's best interest, including such an attempt as might result in
payment of a premium over the market price for shares held by stockholders.
These provisions may also have the effect of rendering changes in the Board of
Directors and management of the Company more difficult. Any discouraging effect
upon takeover attempts could potentially depress the market price of the Common
Stock or inhibit temporary fluctuations in the market price of the Common Stock
that otherwise could result from actual or rumored takeover attempts.
DELAWARE ANTI-TAKEOVER LAW. The Company is a Delaware corporation and is
subject to Section 203 of Delaware Law. In general, Section 203 prevents an
"interested stockholder" (defined generally as a person owning 15% more of a
corporation's outstanding voting stock) from engaging in a "business
combination" with certain Delaware corporations for three years following the
date that person became an interested stockholder unless (i) the corporation
has elected in its certificate of incorporation not to be governed by Section
203 (the Company has not made such an election); (ii) before that person became
an interested stockholder, the board of directors of the corporation approved
the transaction in which the interested stockholder became an interested
stockholder or approved the business combination: (iii) upon consummation of
the transaction that resulted in the interested stockholder becoming an
interested stockholder, the interested stockholder owns 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
right to determine confidentially whether shares held subject to the plan will
be voted or tendered in a tender or exchange offer); or (iv) following the
transaction in which that person became an interested stockholder, the business
combination is approved by the board of directors of the corporation and
authorized at a meeting of stockholders by the affirmative vote of the holders
of two-thirds of the outstanding voting stock of the corporation not owned by
the interested stockholder. The restrictions in Section 203 also do not apply
to certain business combinations proposed by an interested stockholder
following the announcement or notification of an extraordinary transaction
involving the corporation and a person who had not been an interested
stockholder during the previous three years or a person who became an
interested stockholder with the approval of a majority of the corporation's
directors. The term "business combination" is defined generally to include
mergers or consolidations between a Delaware corporation and an "interested
stockholder," transactions with an "interested stockholder" involving the
assets or stock of the corporation or its majority-owned subsidiaries and
transactions which increase an interested stockholder's percentage ownership of
stock.
CLASSIFIED BOARD OF DIRECTORS. The Certificate provides for the Board of
Directors to be divided into three classes of directors denominated Class I,
Class II and Class III, with members of each class
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<PAGE>
holding office for staggered three-year terms. Mitchell B. Olan and Curtis Lee
Smith are Class I Directors whose terms expire at the 1998 annual meeting of
stockholders, Robert Raucci is a Class II Director whose term expires at the
1999 annual meeting of stockholders and Steven R. Matzkin is a Class III
Director whose term expires at the 2000 annual meeting of stockholders (in all
cases subject to election and qualification of their successors or their
earlier death, resignation or removal.) As a result, approximately one-third of
the Board of Directors will be elected each year. Moreover, under Delaware Law,
in the case of a corporation having a classified board, stockholders may remove
a director only for cause. This provision, when coupled with the provisions of
the Certificate and the Bylaws authorizing only the Board of Directors to fill
vacant directorships, will preclude a stockholder from removing incumbent
directors without cause and simultaneously gaining control of the Board of
Directors by filling the vacancies created by such removal with its own
nominees.
STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS. The Certificate
provides that stockholders may not take action by written consent, but may only
take action at duly called annual or special meetings of stockholders. The
Certificate further provides that special meetings of stockholders of the
Company may be called only by a majority of the Board of Directors or the
Company's Chief Executive Officer. This provision may make it more difficult
for stockholders to take actions opposed by the Board of Directors.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. The Bylaws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to nominate candidates for
election as directors at an annual or special meeting of stockholders, must
provide timely notice thereof in writing. To be timely, a stockholder's notice
must be delivered to or mailed and received at the principal executive offices
of the Company not less than 90 days nor more than 120 days prior to the first
anniversary of the date of the Company's notice of annual meeting provided in
connection with the previous year's annual meeting; provided, however, that if
no annual meeting was held in the previous year or the date of the annual
meeting has been changed to be more than 30 calendar days after such
anniversary, such notice to the stockholder to be timely must be so received
not more than 90 days prior to nor later than the later of (i) 60 days prior to
the annual meeting or (ii) the close of business on the 10th day following the
day on which notice of the date of the annual meeting is given to stockholders
or made public. The Bylaws also specify certain requirements for a
stockholder's notice to be in proper written form. These provisions may
preclude some stockholders from bringing matters before the stockholders at an
annual or special meeting or from making nominations for directors at an annual
or special meeting.
VACANCIES. The Certificate and Bylaws provide that a vacancy on the Board
of Directors occurring from an increase in the number of directors or otherwise
may be filled by the vote of a majority of directors then in office, though
less than a quorum, or by a sole remaining director.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of this Offering, the Company will have 6,897,700
shares of Common Stock outstanding, assuming no outstanding stock options or
warrants are exercised. Of these shares, the 2,000,000 shares of Common Stock
sold in this Offering (2,300,000 shares if the Underwriters' over-allotment
option is exercised in full) will be freely tradeable by persons other than
affiliates of the Company, without restriction under the Securities Act. The
remaining 4,897,700 shares of Common Stock will be "restricted securities"
within the meaning of Rule 144 under the Securities Act, and may not be sold in
the absence of registration under the Securities Act unless an exemption from
registration is available, including the exemptions contained in Rule 144.
Commencing January 1998, these shares of Common Stock will become eligible for
sale in the open market, subject to volume and other limitations imposed by
Rule 144. In addition, the Company has granted certain registration rights with
respect to 4,693,857 shares of Common Stock, including shares held by Dr.
Matzkin and the SRM '93 Children's Trust. Dr. Matzkin's employment agreement
also provides that upon termination of his employment for any reason, Dr.
Matzkin has the right to request that the Company register any or all of the
Common Stock then owned by Dr. Matzkin. Sales of all or a portion of such
shares could have a material adverse effect upon the price of the Common Stock.
However, the directors, executive officers and stockholders of the Company have
agreed not to sell, contract to sell or otherwise dispose of any of these
shares of Common Stock for a period of 180 days after the date of this
Prospectus without the prior written consent of Raymond James except for (i)
bona fide gifts or transfers effected by such stockholders other than on any
securities exchange or in the over-the-counter market to donees or transferees
that agree to be bound by similar agreements (the "Lock-up Agreements"), (ii)
sales made by Selling Stockholders to the Underwriters of up to 300,000 shares
to cover over-allotments, if any, (iii) 17,771 shares (assuming an initial
public offering price of $12.00 per share) which may be sold by Dr. Dennis
Corona in connection with the acquisitions of the dental assets of certain of
the PAs and (iv) pledges of shares held by Dr. Matzkin. Raymond James, in its
sole discretion, without notice, may release some or all of the shares subject
to Lock-up Agreements from time to time.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate of the Company, who has
beneficially owned his or her shares for at least one year (including the prior
holding period of any prior owner other than an affiliate) is entitled to sell
within any three-month period that number of shares which does not exceed the
greater of 1% of the outstanding shares of the Common Stock, or the average
weekly trading volume during the four calendar weeks preceding each such sale.
Sales under Rule 144 also are subject to certain manner of sale provisions,
notice requirements, and the availability of current public information about
the Company. A person (or persons whose shares are aggregated) who is not or
has not been deemed an "affiliate" of the Company for at least three months,
and who has beneficially owned shares for at least 2 years (including the
holding period of any prior owner other than an affiliate) would be entitled to
sell such shares under Rule 144 without regard to the limitations discussed
above.
Additionally, the Company intends to file registration statements under
the Securities Act to register all shares of Common Stock subject to then
outstanding stock options and Common Stock issuable pursuant to the Omnibus
Plan and the Non-Qualified Plan. The Company expects to file these registration
statements following the closing of the Offering, and such registration
statements are expected to become effective upon filing. Shares covered by
these registration statements will thereupon be eligible for sale in the public
markets, subject to the Lock-up Agreements. Following the Offering, the Company
may issue its Common Stock from time to time in connection with the acquisition
of the non-dental assets of dental practices. Such securities may be issued in
registered transactions or in transactions exempt from registration under the
Securities Act.
Prior to this offering there has been no market for the Common Stock, and
no accurate prediction can be made of the effect, if any, that market sales of
restricted securities or of shares subject to stock options or the availability
of these shares for sale will have on the market price of the Common Stock
prevailing from time to time. Sales of substantial amounts of any of these
shares in the public market could adversely affect prevailing market prices for
the Common Stock. See "Risk Factors--Shares Eligible for Future Sale."
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<PAGE>
UNDERWRITING
The Underwriters named below, acting through their representatives,
Raymond James & Associates, Inc. and William Blair & Company, L.L.C. (the
"Representatives"), have severally agreed, subject to the terms and conditions
of the underwriting agreement (the "Underwriting Agreement") by and among the
Company, the Selling Stockholders and the Underwriters, to purchase from the
Company the number of shares of Common Stock set forth below opposite their
respective names, at the public offering price less the underwriting discounts
and commissions set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---------------------------------------- ----------
<S> <C>
Raymond James & Associates, Inc. ......
William Blair & Company, L.L.C. ......
Total .............................. 2,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to take
and pay for all shares of Common Stock offered hereby (other than those covered
by the over-allotment option described below) if any such shares are purchased.
The Company and the Selling Stockholders have been advised by the
Representatives that the Underwriters propose to offer the shares of Common
Stock directly to the public at the public offering price set forth on the
cover page of this Prospectus and to certain dealers, including the
Underwriters, at such price less a 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 other dealers. The Representatives
have informed the Company and the Selling Stockholders that the Underwriters do
not intend to confirm sales to any accounts over which they exercise
discretionary authority.
The Selling Stockholders have granted to the Underwriters an option,
exercisable not later than 30 days after the date of this Prospectus, to
purchase up to an aggregate of 300,000 additional shares of Common Stock, at
the public offering price, less the underwriting discounts and commissions, set
forth on the cover page of this Prospectus. To the extent that the Underwriters
exercise such option, each of the Underwriters will have a firm commitment to
purchase approximately the same percentage thereof which the number of shares
of Common Stock to be purchased by it shown in the above table bears to the
total shown, and the Selling Stockholders will be obligated, pursuant to the
option, to sell such shares to the Underwriters. The Underwriters may exercise
this option only to cover such over-allotments, if any, made in connection with
the sale of the shares of Common Stock offered hereby. If purchased, the
Underwriters will sell such additional shares on the same terms as those on
which the shares are being offered. If any Selling Stockholder fails to sell to
the Underwriters any such additional shares, the Company has agreed that it
will issue and sell to the Underwriters an equal number of shares of Common
Stock. In such event, the total Proceeds to the Company will increase by $11.16
(at an assumed offering price of $12.00 per share) multiplied by the number of
such additional shares issued by the Company.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against, and to contribute to losses arising out of, certain civil
liabilities in connection with this offering, including liabilities under the
Securities Act.
The Company and its executive officers, directors and current stockholders
have agreed that they will not, directly or indirectly, offer, sell, offer to
sell, contract to sell, pledge, grant any option to
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<PAGE>
purchase or otherwise sell or dispose (or announce any offer, sale, offer of
sale, contract of sale, pledge, grant of any option to purchase or other sale
or disposition) of any shares of Common Stock or any securities convertible
into, or exercisable or exchangeable for, Common Stock or other capital stock
of the Company, or any right to purchase or acquire Common Stock or other
capital stock of the Company, for a period of 180 days after the date of this
Prospectus, without the prior written consent of Raymond James, except for (i)
bona fide gifts or transfers effected by such stockholders other than on any
securities exchange or in the over-the-counter market to donees or transferees
that agree to be bound by the Lock-up Agreements, (ii) sales made by Selling
Stockholders to the Underwriters of up to 300,000 shares to cover
over-allotments, if any, (iii) 17,771 shares (assuming an initial public
offering price of $12.00 per share) which may be sold by Dr. Dennis Corona at
an assumed price equal to the price per share paid by the public in the
Offering in connection with the acquisitions of the dental assets of certain of
the PAs and (iv) pledges of shares held by Dr. Matzkin. Sales of substantial
amounts of Common Stock in the public market, or the availability of such
shares for future sale, could adversely affect the market price of the Common
Stock and could impair the Company's future ability to raise additional capital
through an offering of its equity securities. See "Risk Factors--Shares
Eligible for Future Sale."
In connection with the offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which such persons may bid for or
purchase Common Stock for the purpose of stabilizing its market price. The
Underwriters also may create a short position for the account of the
Underwriters by selling more Common Stock in connection with the offering than
they are committed to purchase from the Company and in such case may purchase
Common Stock in the open market following completion of the Offering to cover
all or a portion of such short position. The Underwriters may also cover all or
a portion of such short position, up to 300,000 shares, by exercising the
Underwriters' over-allotment option referred to above. In addition, Raymond
James, on behalf of the Underwriters, may impose "penalty bids" under
contractual arrangements with the Underwriters whereby it may reclaim from an
Underwriter (or dealer participating in the offering), for the account of the
other Underwriters, the selling concession with respect to Common Stock that is
distributed in the offering but subsequently purchased for the account of the
Underwriters in the open market. Any of the transactions described in this
paragraph may result in the maintenance of the price of the Common Stock at a
level above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph is required, and, if undertaken, may
be discontinued at any time.
The foregoing includes a summary of the principal terms of the
Underwriting Agreement and does not purport to be complete. Reference is made
to the copy of the Underwriting Agreement that is on file as an exhibit to the
Registration Statement of which this Prospectus forms a part.
Pursuant to a financial advisory agreement between the Company and Nassau
(as amended and clarified, the "Nassau Agreement"), Nassau, a financial advisor
to the Company, is entitled to a fee of $100,000 upon consummation of this
Offering. At such time, Nassau will also receive a warrant to purchase that
number of Shares of Common Stock equal to $350,000 divided by the offering
price of Shares of Common Stock in the Offering, at an exercise price per share
equal to the offering price and a warrant to purchase 53,001 Shares of Common
Stock at an aggregate exercise of $92,355. In addition, the Company has paid to
Nassau fees in the aggregate amount of $79,587 and owes Nassau an additional
$61,621. The Company also has issued an aggregate of 84,802 shares of Common
Stock to Nassau and its related persons at a weighted average price of $0.24
per share.
Prior to the Offering, there has been no public market for the Common
Stock of the Company. Consequently, the initial public offering price for the
Common Stock has been determined through negotiations among the Company and the
Representatives. Among the factors considered in making such determination were
prevailing market conditions, the Company's financial and operating history
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<PAGE>
and condition, its prospects and the prospects of the industry in general, the
management of the Company, and the market prices of securities for companies in
businesses similar to that of the Company.
LEGAL MATTERS
Certain legal matters with respect to the Common Stock offered hereby will
be passed upon for the Company and for the Selling Stockholders by Greenberg
Traurig Hoffman Lipoff Rosen & Quentel, P.A., Miami, Florida, and for the
Underwriters by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.
EXPERTS
The consolidated financial statements of Dental Care Alliance, Inc. as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 included in this Prospectus have been so included in reliance
on the report of Price Waterhouse LLP, independent certified public
accountants, given on the authority of said firm as experts in auditing and
accounting.
In February 1997 the Company's Board of Directors approved a change in
accountants and the Company's predecessor subsidiaries' former accountants were
dismissed. The independent accounting firm of Price Waterhouse LLP was
subsequently engaged by the Company. The former accountants had not previously
rendered a report on the Company, however, their report on the financial
statements of the Company's predecessor subsidiaries for the years ended
December 31, 1995 and 1994 did not contain an adverse opinion or disclaimer
opinion, and was not qualified or modified as to uncertainty, audit scope or
accounting principles. In addition, there were no disagreements between the
Company and its former accountants on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure during
the two most recent fiscal years ended December 31, 1996 and subsequent interim
periods.
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-1 (the
"Registration Statement") with the Commission under the Securities Act in
respect of the Common Stock offered hereby. For purposes of this Prospectus,
the term "Registration Statement" means the initial Registration Statement and
any and all amendments thereto. This Prospectus omits certain information
contained in the Registration Statement as permitted by 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 thereto. Statements herein
concerning the contents of any contract or other document are not necessarily
complete, and in each instance reference is made to such contract or other
document filed with the Commission as an exhibit to the Registration Statement,
or otherwise, each such statement, being qualified by and subject to such
reference in all respects.
As a result of this offering, the Company will become subject to the
informational requirements of the Exchange Act, and in accordance therewith
will file reports, proxy and information statements, and other information with
the Commission. Reports, registration statements, proxy and information
statements, and other information filed by the Company with the Commission can
be inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and at its regional offices located at 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and Seven World Trade Center, Suite 1300,
New York, New York 10048. Copies of these material may be obtained at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549. The Commission maintains
a site on the World Wide Web (http://www.sec.gov) that contains reports,
registration statements, proxy and information statements, and other
information.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Certified Public Accountants ...... F-2
Consolidated Balance Sheets .............................. F-3
Consolidated Statements of Operations .................. F-4
Consolidated Statements of Stockholders' Equity ......... F-5
Consolidated Statements of Cash Flows .................. F-6
Notes to Consolidated Financial Statements ............... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders' of Dental Care Alliance, Inc.
The stock split described in Note 1 to the Financial Statements has not
been effected by October 6, 1997. When the stock split has been effected, we
will be in a position to furnish the following report:
"In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Dental Care Alliance, Inc. (the "Company") successor to Golden Care Holdings,
Inc. and its subsidiaries' at December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles. 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 audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above."
Price Waterhouse LLP
Tampa, Florida
August 26, 1997
F-2
<PAGE>
DENTAL CARE ALLIANCE, INC.
(SUCCESSOR TO GOLDEN CARE HOLDINGS L.C.)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
-------------------------- JUNE 30, JUNE 30,
1995 1996 1997 1997
----------- ------------ ------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................. $ 42,193 $1,253,259 $ 876,217 $ 876,217
Consulting and license fees receivable .................. 64,842 59,000 58,352 58,352
Management fee receivable from P.A.s .................. 43,651 397,441 576,456 576,456
Advances to P.A.s ....................................... -- 16,454 287,127 287,127
Other current assets .................................... 620 27,644 15,871 15,871
Current portion of long-term notes receivable
from P.A.s .......................................... 56,375 68,460 73,266 73,266
---------- ----------- ---------- ----------
Total current assets ................................. 207,681 1,822,258 1,887,289 1,887,289
Property and equipment, net .............................. 51,294 40,230 219,910 219,910
Intangible assets, net ................................. 15,833 803,753 793,535 793,535
Long-term notes receivable from P.A.s,
less current portion .................................... 145,095 129,935 100,490 100,490
Consulting and license fees receivable, non current ...... 98,925 251,925 300,000 300,000
Other assets ............................................. 5,715 74,838 69,244 69,244
---------- ----------- ---------- ----------
Total assets .......................................... $ 524,543 $3,122,939 $3,370,468 $3,370,468
========== =========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ....................................... $ 34,471 $ 491,509 $ 574,283 $ 574,283
Accrued payroll and payroll related costs ............... 16,391 124,236 212,572 212,572
Other accrued liabilities .............................. 2,005 67,008 87,245 87,245
Current portion of long-term debt ..................... 56,138 173,652 161,807 161,807
---------- ----------- ---------- ----------
Total current liabilities .............................. 109,005 856,405 1,035,907 1,035,907
Long-term debt, less current portion ..................... 107,607 40,350 28,746 28,746
---------- ----------- ---------- ----------
Total liabilities .................................... 216,612 896,755 1,064,653 1,064,653
---------- ----------- ---------- ----------
Commitments and contingencies
Minority interest in consolidated subsidiaries ......... 11,094 -- -- --
Mandatorily redeemable preferred stock, $.01 par value,
15,000 shares authorized, issued and outstanding ...... -- 1,402,562 1,473,062 --
Put rights associated with common stock .................. -- 191,237 191,237 --
---------- ----------- ---------- ----------
11,094 1,593,799 1,664,299 --
---------- ----------- ---------- ----------
Stockholders' equity:
Common stock, $.01 par value, 50,000,000 shares
authorized, 3,791,610, 3,995,460 and 4,243,342 issued
and outstanding at December 31, 1995, 1996, and
June 30, 1997 (unaudited), respectively, 4,897,700
issued and outstanding--pro forma (unaudited) ......... 37,916 39,955 42,433 48,977
Additional paid-in capital .............................. 242,202 554,696 844,506 2,502,261
Stock subscription receivable ........................... -- -- (272,268) (272,268)
Retained earnings ....................................... 16,719 37,734 26,845 26,845
---------- ----------- ---------- ----------
Total stockholders' equity ........................... 296,837 632,385 641,516 2,305,815
---------- ----------- ---------- ----------
Total liabilities and stockholders' equity ............ $ 524,543 $3,122,939 $3,370,468 $3,370,468
========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
DENTAL CARE ALLIANCE, INC.
(SUCCESSOR TO GOLDEN CARE HOLDINGS L.C.)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------ --------------------------
1994 1995 1996 1996 1997
---------- ------------ ------------ ------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Management fees ....................................... $673,304 $ 513,705 $1,289,828 $405,072 $2,471,759
Consulting and licensing fees ........................ 42,763 262,769 347,600 138,812 161,885
--------- --------- ---------- -------- ----------
Total revenues .................................... 716,067 776,474 1,637,428 543,884 2,633,644
--------- --------- ---------- -------- ----------
Managed dental center expenses:
Staff salaries and benefits ........................ -- -- 223,657 -- 601,383
Dental supplies .................................... -- -- 79,448 -- 213,334
Laboratory fees .................................... -- -- 98,222 -- 373,010
Marketing .......................................... -- -- 38,128 -- 176,627
Occupancy .......................................... -- -- 106,501 -- 333,085
Other ................................................ -- -- 57,182 -- 326,494
--------- --------- ---------- -------- ----------
Total managed dental center expenses ............... -- -- 603,138 -- 2,023,933
--------- --------- ---------- -------- ----------
716,067 776,474 1,034,290 543,884 609,711
Salaries and benefits .............................. 408,716 400,669 521,683 261,642 373,016
General and administrative ........................ 204,901 234,577 260,558 118,476 135,970
Advisory services .................................... -- 127,768 -- -- --
Depreciation and amortization ........................ 15,150 22,106 27,654 10,254 41,578
--------- --------- ---------- -------- ----------
Operating income (loss) ........................... 87,300 (8,646) 224,395 153,512 59,147
Interest income (expense), net ..................... 22,584 6,494 20,781 (5,058) 36,464
--------- --------- ---------- -------- ----------
Income (loss) before income taxes
and minority interest .............................. 109,884 (2,152) 245,176 148,454 95,611
Provision for income taxes ........................... 19,919 -- 35,500 -- 36,000
Minority interest .................................... 2,440 8,654 7,674 3,537 --
--------- --------- ---------- -------- ----------
Net income (loss) .................................... 87,525 (10,806) 202,002 144,917 59,611
Adjustment to redemption value of common and
preferred securities .............................. 39,951 85,709 (191,237) -- (10,500)
Cumulative preferred stock dividend .................. -- -- (6,485) -- (60,000)
--------- --------- ---------- -------- ----------
Net income (loss) applicable to common stock ......... $127,476 $ 74,903 $ 4,280 $144,917 $ (10,889)
========= ========= ========== ======== ==========
Unaudited pro forma data:
Income (loss) before income taxes and
minority interest ................................. $109,884 $ (2,152) $ 245,176 $148,454 $ 95,611
Pro forma provision for income taxes ............... 42,000 -- 94,000 57,000 36,000
Minority interest in consolidated subsidiaries ...... 1,507 5,343 4,739 2,184 --
--------- --------- ---------- -------- ----------
Pro forma net income (loss) ........................ $ 66,377 $ (7,495) $ 146,437 $ 89,270 $ 59,611
========= ========= ========== ======== ==========
Primary pro forma net income per
common share ....................................... $ .03 $ .01
========== ==========
Primary weighted average common
shares outstanding ................................. 4,773,071 4,773,071
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
DENTAL CARE ALLIANCE, INC.
(SUCCESSOR TO GOLDEN CARE HOLDINGS L.C.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON ADDITIONAL
COMMON STOCK PAID-IN RETAINED
STOCK ($.01 PAR) CAPITAL EARNINGS TOTAL
----------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1994 ..................... 3,791,610 $37,916 $ 9,929 $ -- $ 47,845
Contribution from stockholder ............... 88,750 88,750
Preferred Stock--accretion to put value ...... (125,671) (125,671)
Common Stock--accretion to put value ......... 39,951 39,951
Net income ................................. 87,525 87,525
Dividends .................................... (20,000) (20,000)
---------- -------- ---------- ---------- ----------
Balance, December 31, 1994 .................. 3,791,610 37,916 12,959 67,525 118,400
Net loss .................................... (10,806) (10,806)
Cash contribution from stockholder ......... 15,766 15,766
Common stock--accretion to put value ......... 85,709 85,709
Issuance of warrants ........................ 127,768 127,768
Dividends .................................... (40,000) (40,000)
---------- -------- ---------- ---------- ----------
Balance, December 31, 1995 .................. 3,791,610 37,916 242,202 16,719 296,837
Net Income--January 1 to
October 25, 1996 .............................. 157,783 157,783
Purchase of minority interest ............... 18,768 18,768
Reclassification of members capital upon
C-Corporation election (see Note 1) ......... 174,502 (174,502) --
Issuance of common stock ..................... 203,850 2,039 310,461 312,500
Common stock--accretion to put value ......... (191,237) (191,237)
Accrued dividends on mandatorily
redeemable preferred stock .................. (6,485) (6,485)
Net income--October 26 to
December 31, 1996 ........................... 44,219 44,219
---------- -------- ---------- ---------- ----------
Balance, December 31, 1996 .................. 3,995,460 39,955 554,696 37,734 632,385
Adjustment to redemption value of
preferred stock ........................... (10,500) (10,500)
Accrued dividends on mandatorily
redeemable preferred stock .................. (60,000) (60,000)
Issuance of common stock ..................... 247,882 2,478 289,810 292,288
Stock subscription receivable ............... (272,268) (272,268)
Net Income .................................... 59,611 59,611
---------- -------- ---------- ---------- ----------
Balance, June 30, 1997--unaudited ............ 4,243,342 $42,433 $ 572,238 $ 26,845 $ 641,516
========== ======== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-5
<PAGE>
DENTAL CARE ALLIANCE, INC.
(SUCCESSOR TO GOLDEN CARE HOLDINGS L.C.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------
1994 1995 1996
------------- -------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .......................................... $ 87,525 $ (10,806) $ 202,002
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization .............................. 15,150 22,106 27,654
Gain on sale of equipment ................................. (16,804) -- --
Issuance of warrants for advisory services ............... -- 127,768 --
Minority interest .......................................... 2,440 8,654 7,674
(Increase) decrease in:
Consulting and license fees receivable ..................... (65,602) (72,765) (147,158)
Management fee receivable from P.A.s ........................ (16,760) 2,463 (353,790)
Other assets ................................................ (1,980) (3,580) (96,147)
Increase (decrease) in:
Accounts payable .......................................... (86,169) 13,324 457,038
Other accrued liabilities ................................. -- 1,868 65,003
Accrued payroll and payroll related costs .................. -- (13,159) 107,845
----------- ---------- ----------
Net cash (used in) provided by operating activities ...... (82,200) 75,873 270,121
----------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment, net ..................... (177,778) (4,703) (4,444)
(Advances made) payments received on notes receivable
from P.A.s ................................................ (116,286) 19,054 3,075
Investment in servicing agreements ........................... -- (20,000) (486,489)
----------- ---------- ----------
Net cash used in investing activities ..................... (294,064) (5,649) (487,858)
----------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of mandatorily redeemable
preferred stock, net ....................................... -- -- 1,395,000
Proceeds from issuance of common stock ..................... -- -- --
Contribution from stockholder .............................. 88,739 15,766 --
Proceeds on sales of equipment .............................. 4,227 -- --
Payments of long-term debt ................................. (10,787) (45,692) (67,257)
Proceeds from issuance of long-term debt ..................... 211,584 -- 117,514
Advances to P.A.s .......................................... -- -- (16,454)
Dividends ................................................... (20,000) (40,000) --
----------- ---------- ----------
Net cash provided by (used in) financing activities ...... 273,763 (69,926) 1,428,803
----------- ---------- ----------
Net (decrease) increase in cash and cash equivalents ...... (102,501) 298 1,211,066
Cash and cash equivalents at beginning of period ............ 144,396 41,895 42,193
----------- ---------- ----------
Cash and cash equivalents at end of period .................. $ 41,895 $ 42,193 $1,253,259
=========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for income taxes .................. $ -- $ 23,903 $ --
Cash paid during the year for interest ..................... $ 5,775 $ 19,282 $ 13,955
Issuance of common stock for non cash consideration ......... $ -- $ -- $ 312,500
Assumption of accounts payable and accrued liabilities
related to revision of management service agreements ...... $ -- $ -- $ 438,300
Increase to redemption value of preferred stock ............ $ -- $ -- $ --
Increase in cumulative preferred stock dividend ............
Elimination of minority interest ........................... $ 18,768
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------
1996 1997
------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .......................................... $ 144,917 $ 59,611
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization .............................. 10,254 41,578
Gain on sale of equipment ................................. -- --
Issuance of warrants for advisory services ............... -- --
Minority interest .......................................... 3,537 --
(Increase) decrease in:
Consulting and license fees receivable ..................... (60,226) (47,427)
Management fee receivable from P.A.s ........................ (94,921) (179,015)
Other assets ................................................ (41,097) 17,367
Increase (decrease) in:
Accounts payable .......................................... 4,129 82,774
Other accrued liabilities ................................. -- 20,237
Accrued payroll and payroll related costs .................. 7,132 88,336
---------- -----------
Net cash (used in) provided by operating activities ...... (25,775) 83,461
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment, net ..................... (4,444) (211,040)
(Advances made) payments received on notes receivable
from P.A.s ................................................ (15,034) 24,639
Investment in servicing agreements ........................... (1,167) --
---------- -----------
Net cash used in investing activities ..................... (20,645) (186,401)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of mandatorily redeemable
preferred stock, net ....................................... -- --
Proceeds from issuance of common stock ..................... -- 20,020
Contribution from stockholder .............................. -- --
Proceeds on sales of equipment .............................. -- --
Payments of long-term debt ................................. -- (23,449)
Proceeds from issuance of long-term debt ..................... 50,459 --
Advances to P.A.s .......................................... -- (270,673)
Dividends ................................................... -- --
---------- -----------
Net cash provided by (used in) financing activities ...... 50,459 (274,102)
---------- -----------
Net (decrease) increase in cash and cash equivalents ...... 4,039 (377,042)
Cash and cash equivalents at beginning of period ............ 42,193 1,253,259
---------- -----------
Cash and cash equivalents at end of period .................. $ 46,232 $ 876,217
========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for income taxes .................. $ -- $ --
Cash paid during the year for interest ..................... $ 8,659 $ 6,809
Issuance of common stock for non cash consideration ......... $ -- $ --
Assumption of accounts payable and accrued liabilities
related to revision of management service agreements ...... $ -- $ --
Increase to redemption value of preferred stock ............ $ -- $ 10,500
Increase in cumulative preferred stock dividend ............ $ 60,000
Elimination of minority interest ...........................
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
DENTAL CARE ALLIANCE, INC.
(SUCCESSOR TO GOLDEN CARE HOLDINGS L.C.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. OPERATIONS AND ORGANIZATION
Dental Care Alliance, Inc. ("DCA" or the "Company") was formed on October
23, 1996 with a nominal capital contribution, to effect a reorganization (the
"Reorganization") among DCA, Golden Care Holdings L.C. ("GCH"), the predecessor
entity, and its majority owned subsidiaries Golden Care Network, L.C.("GCN"),
and Prophet Management L.C. ("PM"). DCA and GCH completed the Reorganization on
October 25, 1996 by transferring substantially all of the assets, liabilities
and operations of GCH, GCN and PM to DCA. Concurrently, shares of DCA were
issued in exactly the same proportion as the shareholders of GCH.
As the shareholders of DCA and GCH, and their related ownership
percentages, were identical at the time of the Reorganization, the
Reorganization has been accounted for in a manner similar to a pooling of
interests. The effects of the Reorganization, resulting in the recording of a
charge to recognize deferred income taxes upon conversion to C corporation
status have been reflected in these financial statements.
GCH was incorporated in 1993 as a Florida Limited Liability Corporation
which held 99% of GCN and 90% of PM. Concurrent with the Reorganization, the
10% minority shareholder of PM transferred his ownership interest in the assets
of PM in exchange for 81,540 shares of the stock of DCA. These shares were
issued to the minority shareholder at fair market value of $125 per share as
determined by an independent third party appraisal of the common stock of the
Company as of this date. As a result of this transaction, $125,000 was
capitalized by DCA and is reflected as a component of intangible assets in the
underlying financial statements and is being amortized over 15 years. No step
up in basis for the 1% minority share of GCN has been reflected, as the
shareholders and shareholders' percentages of DCA and GCH were exactly the same
on the date of the Reorganization, and the fair value of the 1% ownership
interest is not material.
The Company and its predecessor provide management, consulting and
licensing services to dental practices in Florida and Michigan. The dental
practices are owned by separate Professional Associations (the "P.A.s"), and
the Company has entered into long-term Administrative Services Agreements
("Management Agreements") with the P.A.s to provide administrative, financial
and technical support and expertise to the P.A.s in exchange for management,
consulting and licensing fees, as described in Note 3.
Each P.A. employs and directs the professional dental staff, including the
dentists and hygienists, and provides all of the clinical services to the
patients. The Company employs and directs the administrative staff and manages
in collaboration with the P.A. owner, all of the remaining administrative,
financial, marketing and professional services of the practice. As of December
31, 1996, the Company provided these management services to 12 Managed Dental
Centers, all located in Florida. For the years ended December 1996, 1995 and
1994, of the 12, 9 and 7 Managed Dental Centers, 10, 6 and 1 centers were owned
and controlled by the same individual and resulted in $1,022,000, $288,000 and
$4,000 of the Company's management fees, respectively. As further described in
Note 3, these 10 Management Agreements were modified concurrent with the
Reorganization, in exchange for 81,540 shares of the Company and assumption of
the existing working capital liabilities of the P.A.s of $438,300. The fair
value of these shares ($125,000) and the working capital liabilities assumed
have been recorded as an intangible asset and are being amortized over the 25
year life of the agreements.
F-7
<PAGE>
DENTAL CARE ALLIANCE, INC.
(SUCCESSOR TO GOLDEN CARE HOLDINGS L.C.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. OPERATIONS AND ORGANIZATION--(CONTINUED)
The Company also provides consulting services to other P.A.s, under
contracts in which the P.A. employs the administrative staff. Under such
agreements, the Company reviews and consults on the financial and operational
efficiencies of the practices. These consulting agreements were originally held
by an entity which is approximately 80% controlled by the Company's President
and controlling shareholder (see Note 14 Subsequent Events). The 20% minority
shareholder assigned his interest in these agreements to the Company on October
25, 1996 in exchange for 40,770 shares of the Company's common stock which was
valued at $125 per share, as determined by an independent third party
appraisal. As a result of this transaction, $62,500 was capitalized and is
reflected as a component of intangible assets in the underlying financial
statements and is being amortized over the 8 year remaining life of these
agreements. As of December 31, 1996, the Company provided these consulting
services to 4 Managed Dental Centers, all located in Michigan (see Note 14,
Subsequent Events).
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation/basis of consolidation. The accompanying
consolidated financial statements have been prepared on the accrual basis of
accounting and include only those operations which are under the ownership and
financial control of the Company. All intercompany accounts and transactions
have been eliminated in consolidation. The Company's predecessor subsidiaries
were consolidated for the years ended 1995 and 1994. Where the Company does not
have any ownership in or exercise control over the dentistry activities of the
P.A.s, the accompanying financial statements do not consolidate the results of
the P.A.s. Each P.A. transaction and relationship entered into is evaluated
based on its relevant facts and circumstances.
The Emerging Issues Task Force, an advisory committee of the Financial
Accounting Standards Board, is currently evaluating certain matters relating to
accounting practices for physician practice management companies, which the
Company expects will include a review of the consolidation of professional
associations with which such companies have management agreements and the
financial statements. Any required changes to the accounting practices of
physician practice management companies resulting from this review could have a
material adverse effect on the Company's reported results of operations.
BASIS OF PRESENTATION--INTERIM FINANCIAL STATEMENTS (UNAUDITED). The
financial statements for the six months ended June 30, 1997 and 1996 are
unaudited and have been prepared by the Company. In the opinion of management,
all adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the results of its operations for the six months ended June 30,
1997 and 1996 have been included herein. The results of operations for the six
month period are not necessarily indicative of the results for the full year.
F-8
<PAGE>
DENTAL CARE ALLIANCE, INC.
(SUCCESSOR TO GOLDEN CARE HOLDINGS L.C.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
STOCK SPLIT. On October 6, 1997, the Company's Board of Directors
authorized a 1 for 81.54 stock split (but has not yet become effective). The
increase in authorized shares and the stock split have been retroactively
reflected in these financial statements. The Company also authorized an
increase of its authorized common shares to 50 million.
UNAUDITED PRO FORMA NET INCOME PER SHARE. The Company's historical capital
structure is not indicative of its prospective structure due to the conversion
of preferred stock into common stock and the termination of the common stock
put rights that will occur concurrent with the closing of the Offering.
Accordingly, historical net income per share is not considered meaningful and
has not been presented herein.
Pro forma net income per share is based on the weighted average number of
common shares and dilutive common equivalent shares outstanding during the
periods. Pro forma net income per share also assumes the conversion of
preferred stock into common stock on the date of issuance and assumes the
issuance of all contingently issuable options. Common stock and common
equivalent shares issued within one year prior to the filing of the Company's
registration statement at prices less than the initial public offering price
have been included for all periods presented using the treasury stock method.
EARNINGS PER SHARE. Had the effects of conversion of preferred stock into
common stock and elimination of put rights not been assumed, historical
earnings per share on a primary and fully diluted basis would have been as
follows. Fully diluted are consistent with primary earnings per share:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
----------------------------------------
1994 1995 1996
------------ ----------- -----------
<S> <C> <C> <C>
Primary Earnings Per Share ...... $ .02 -- $ .04
Weighted Average Shares ......... 4,773,071 4,773,071 4,773,071
</TABLE>
REVENUE RECOGNITION. The Company records its revenue in accordance with
Management Agreements and other consulting and licensing agreements further
described in Note 3.
ADVERTISING. The costs of advertising, promotion and marketing,
aggregating $18,902, $14,437, and $42,272 for the years ended December 31,
1994, 1995, and 1996, respectively, are expensed when incurred and are included
in general and administrative expenses.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The estimated fair value of amounts
reported in the financial statements have been determined by using available
market information and appropriate valuation methodologies. The carrying value
of all current assets and current liabilities approximates fair value because
of their short-term nature. The carrying value of all non-current financial
instruments are considered to approximate fair value based on current market
rates and instruments with similar risks and maturities.
CASH AND CASH EQUIVALENTS. The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.
CONSULTING AND LICENSING FEES RECEIVABLE. Consulting and licensing fees
receivable represents amounts owed to the Company from various P.A.s for
consulting and licensing fees provided under
F-9
<PAGE>
DENTAL CARE ALLIANCE, INC.
(SUCCESSOR TO GOLDEN CARE HOLDINGS L.C.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
contracts. The Company reviews the collectibility of its receivables related to
consulting and license fees. This review is based upon the cash flow of the
P.A.s and the adequacy of the collateral of the assets of the P.A.s.
MANAGEMENT FEE RECEIVABLE FROM P.A. Management fee receivable from P.A.
consists of amounts owed to the Company related to revenue recorded in
accordance with Management Agreements and is recorded based upon the net
realizable value of patient accounts receivables of the P.A.s. The Company
reviews the collectibility of the patient accounts receivables of the P.A.s and
adjusts its management fee receivable accordingly.
ADVANCES TO P.A.S. Advances to P.A.s consist of receivables from P.A.s in
connection with working capital advances made to affiliated practices. The
Company reviews the collectibility of its receivables related to advances to
P.A.s. This review is based upon the cash flow of the P.A.s, and the fair
market value of the collateral of the assets of the P.A.s. Commencing August
1997, under terms of a note agreement such advances are repayable under terms
calling for interest at 8%, maturing on June 30, 1998. Any future advances will
be due within 12 months of issuance at 8%, adjusted for any changes in the
Company's borrowing note. All advances and payables between P.A.'s under common
ownership have a right of offset included in the agreement.
NOTES RECEIVABLE FROM P.A.S. Notes receivable from P.A.s relate to
financing of capital improvements made by P.A.s covering certain medical and
non-medical assets. Notes receivables from P.A.s generally have terms of 2 to 5
years, are interest bearing with rates between 10% and 18.5% percent, and are
secured by the assets of the Managed Dental Center and personally guaranteed by
the P.A. owner.
PROPERTY AND EQUIPMENT. Property and equipment are stated at cost.
Expenditures for maintenance and repairs are charged to expenses as incurred
and expenditures for additions and betterments are capitalized. The cost of
assets sold or otherwise disposed of and the related accumulated depreciation
are eliminated from the accounts and any resulting gain or loss is reflected in
the statement of operations.
Depreciation is computed by using the straight-line method over the
estimated useful life of the asset, ranging from 3 to 10 years. Leasehold
improvements are amortized over their estimated useful life or the remaining
lease period, whichever is less.
INTANGIBLE ASSETS. Intangible assets includes certain organizational costs
associated with the incorporation of the Company and costs related to
consideration given to entities in exchange for (i) waiver by a minority
shareholder of any rights to receive management fees under certain management
agreements, (ii) revised terms to existing management service agreements and
(iii) the purchase of minority shareholder rights in PM. Intangible assets are
being amortized over periods of 8-25 years. Accumulated amortization related to
intangible assets was $4,167 and $7,146 at December 31, 1995 and 1996,
respectively.
CONTRIBUTION FROM SHAREHOLDER. Contribution from shareholder, net of
accretion to put value, in 1994 of $(36,921) relates to a cash contribution of
$88,750 reduced by $125,671 related to the value of the put option as an
increase in temporary equity and a reduction of additional paid-in capital.
F-10
<PAGE>
DENTAL CARE ALLIANCE, INC.
(SUCCESSOR TO GOLDEN CARE HOLDINGS L.C.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
STOCK BASED COMPENSATION. In October 1995 the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION ("SFAS No. 123"), which is effective
for fiscal years beginning after December 15, 1995. Under SFAS No. 123, the
Company may elect to recognize stock-based compensation expense based on the
fair value of the awards or continue to account for stock-based compensation
under Accounting Principles Board Opinion No. 25 ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES ("APB No. 25") and disclose in the financial statements the effects
of SFAS No. 123 as if the recognition provisions were adopted. The Company has
elected to continue to account for its existing stock based compensation under
APB No. 25 and adopt the disclosure only requirements of SFAS No. 123. In the
event that the Company adopts a stock-based compensation plan for
non-employees, the Company will recognize such stock based compensation
expense, as well as shares contingently issuable to P.A.s in the event of an
initial public offering by the Company, under SFAS No. 123.
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 could differ from those estimates.
DEPENDENCE ON THE P.A.S. The Company receives fees for services provided
to the P.A.s under Management Agreements, and consulting and licensing
agreements, but does not employ dentists or control the practices of the
dentists employed by the P.A.s. The Company's revenue is dependent on revenue
generated by the P.A.s and in some cases the net profits, therefore, effective
and continued performance of the Managed Dental Centers during the term of the
Agreements is essential to the Company's long-term success.
The Management Agreements are generally for a term of 25 years beginning
on the effective date of each individual agreement and renewing each and every
year on the anniversary date of the subsequent year for a period of generally
25 years and may be terminated by the P.A., or the Company, under certain
events of default "with cause" as defined including a material default by or
bankruptcy of the Company. In the event of a material default by the P.A., or
its owner, the P.A. can sell the practice to a third party mutually agreed to
or sell its assets to the Company for a preset formula price and assign
ownership interest to a P.A. agreeable to all parties. In the event that the
proper notification is given to the Company, the P.A. can terminate the
agreement at any time without cause if it sells the practice and assigns the
agreement to another party to be approved by the Company. The sales price in
such event will be determined through negotiations among the selling P.A. and
the buyer. In no event can the Company replace the P.A. at will or for a
nominal fee, except in the event of default. Any material loss of revenue by
the P.A.s would have a material adverse effect on the Company, including the
P.A.s' ability to repay their indebtedness to the Company.
AFFILIATIONS WITH PRACTICES. During the three years ended December 31,
1994, 1995 and 1996 the Company affiliated with dental practices by executing
Management Agreements. In addition to the affiliation with the five existing
Managed Dental Centers, the Company executed four, four and two new Management
Agreements for the years ended December 31, 1994, 1995 and 1996, respectively.
Net practice revenues for these practices were approximately $210,000, $491,000
and $664,000, respectively,
F-11
<PAGE>
DENTAL CARE ALLIANCE, INC.
(SUCCESSOR TO GOLDEN CARE HOLDINGS L.C.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
during these periods. During this same period, the number of affiliations with
dental practices that were terminated were 0, 2 and 1, respectively. Net
practice revenues for these practices were approximately $757,000 and $102,000,
for the years ended December 31, 1994 and 1995, respectively.
INTANGIBLES AND LONG LIVED ASSETS. The Company evaluates whether events
and circumstances have occurred that indicate the carrying amount of long-lived
assets may be impaired, by comparison of undiscounted cash flows from
operations with related carrying value of the assets. At December 31, 1996, the
unamortized balance of these assets are not considered to be impaired.
ADOPTION OF NEW ACCOUNTING STANDARDS. In February, 1997, the Financial
Accounting Standards Board issued Statement No. 128 "Earnings Per Share" ("SFAS
No. 128"), which replaces the presentation of primary EPS with basic EPS and
requires diluted EPS be presented for entities with complex capital structures.
This Statement is effective for fiscal periods ending after December 15, 1997
and early application is not permitted. Under SFAS No. 128 reporting
requirements, basic and fully diluted EPS on a pro forma basis would have been
$.04 and $.03 per share, respectively, for the year ended December 31, 1996 and
$.01 and $.01 per share, respectively, for the six month period ended June 30,
1997.
INCOME TAXES AND PRO FORMA INCOME TAXES. Upon its incorporation on October
23, 1996, as described in Note 1, the Company terminated its predecessor status
as a Limited Liability Corporation and is now subject to federal income taxes.
As such, the financial statements in 1996, 1995 and 1994 include a pro forma
adjustment for income taxes as if the Company had been treated as a C
Corporation. The effective rate utilized approximates the combined statutory
federal and state income tax rate, net of the tax effects of minority interest
in current earnings. Effective October 25, 1996, the Company accounted for
income taxes under the liability method in accordance with Statement of
Financial Accounting Standards, NO. 109, ACCOUNTING FOR INCOME TAXES ("SFAS No.
109").
Due to the conversion of the preferred stock into common stock and the
termination of the common stock put rights that will occur concurrent with the
closing of the Offering, pro forma net income per share is computed using the
pro forma net income of the Company before deductions for the adjustment in
redemption value of the common and preferred securities and preferred stock
dividends.
PRO FORMA BALANCE SHEET--UNAUDITED. The pro forma balance sheet as of June
30, 1997 is presented to give effect for the anticipated initial public
offering of the Company's securities at which time the amount ascribed to
common stock put rights will be returned to permanent net equity upon
consummation of the initial public offering and mandatorily redeemable
preferred stock will be converted to common stock of the Company. The pro forma
balance sheet does not contain the proceeds estimated to be received by the
Company upon consummation of the Offering.
3. REVENUE RECOGNITION
Management Fees. Management fees represents revenue earned from managed
dental practices less amounts retained by the practices for those P.A.s where
the Company provides management services.
F-12
<PAGE>
DENTAL CARE ALLIANCE, INC.
(SUCCESSOR TO GOLDEN CARE HOLDINGS L.C.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. REVENUE RECOGNITION--(CONTINUED)
The Company earns management fees from the P.A.s under two types of
contracts: net revenue and net profits. Under the net revenue contracts,
management fees are equal to 74% of the patient revenues earned by the P.A.
Such contracts also stipulate that the Company must pay certain expenses, as
defined by the Management Agreement. Under the net profits contracts,
management fees are equal to between 50% and 90% of the practice's net profits,
as defined. Net profit is calculated by subtracting practice expenses (which
constitutes both dental and non-dental expenses), excluding depreciation and
amortization, from net practice revenue. Contractual revenues and related
expenses have, for purposes of the accompanying financial statements, been
reflected on an accrual basis.
The amounts contractually retained by the practices under net revenue
contracts are intended to cover amounts incurred for (1) salary and benefits to
employ the dentists, hygienists and contracted specialists; (2) licensing fees
to be paid to the Company; (3) debt and asset carrying costs on the acquisition
of the practices; and (4) any other direct costs to the P.A. not covered under
the Management Agreement.
Effective October 1996, the Company revised the term of all of its 12 then
existing Management Agreements such that the Company is responsible for the
payment of all non-professional expenses of the Managed Dental Centers. Ten
Management Agreements were also revised to base the Company's management fee
from a percentage of net profits at each PA to a percentage of net patient
revenue from each PA and two Management Agreements were modified to assign
additional responsibilities to the Company. Accordingly, prior to these
revisions to such 12 Management Agreements, all non-professional expenses of
the Managed Dental Centers and related revenues were reflected in each PA's
financial statements. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The Company expects to primarily utilize
net revenue contracts in the future. Management fees for the remaining two
Managed Dental Centers under the net profits contracts are calculated based
upon 50%--55% of net profits.
The PA located in Port Charlotte, Florida has the right to terminate its
Management Agreement during a 90-day period beginning in October 1998. The two
Management Agreements on a net profits basis expire in 2003.
F-13
<PAGE>
DENTAL CARE ALLIANCE, INC.
(SUCCESSOR TO GOLDEN CARE HOLDINGS L.C.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. REVENUE RECOGNITION--(CONTINUED)
The following table sets forth the gross practice revenue earned and
amounts retained by the P.A.s, and the management fees earned by the Company
for the periods ended:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------- JUNE 30,
1994 1995 1996 1997
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
COMMONLY CONTROLLED P.A.S--NET REVENUE CONTRACTS
(10/26/96-12/31/96) (NON-TERMINATED):
Net practice revenue .............................. $ -- $ -- $ 725,215 $2,699,551
Amounts contractually retained by the P.A.s ......... -- -- 188,554 701,884
----------- ----------- ----------- -----------
Management fees .................................... $ -- $ -- $ 536,661 $1,997,667
=========== =========== =========== ===========
COMMONLY CONTROLLED P.A.S--NET PROFIT CONTRACTS
(1/1/94-10/25/96) (NON-TERMINATED):
Net practice revenue .............................. $ 75,292 $1,115,011 $3,290,171 $ --
Amounts contractually retained by the P.A.s ......... 71,825 983,864 2,820,871 --
----------- ----------- ----------- -----------
Management fees .................................... $ 3,467 $ 131,147 $ 469,300 $ --
=========== =========== =========== ===========
ALL OTHER P.A.S (ALL UNDER NET PROFIT CONTRACTS)
(NON-TERMINATED):
Net practice revenue .............................. $2,268,875 $2,454,859 $1,459,121 $ 829,691
Amounts contractually retained by the P.A.s ......... 1,838,013 2,169,545 1,178,370 355,599
----------- ----------- ----------- -----------
Management fees .................................... $ 430,862 $ 285,314 $ 280,751 $ 474,092
=========== =========== =========== ===========
TERMINATED CONTRACTS (ALL UNDER NET PROFIT CONTRACTS):
Net practice revenue .............................. $1,359,263 $ 945,149 $ 101,552 $ --
Amounts contractually retained by the P.A.s ......... 1,120,288 847,905 98,436 --
----------- ----------- ----------- -----------
Management fees .................................... $ 238,975 $ 97,244 $ 3,116 $ --
=========== =========== =========== ===========
ALL P.A.S COMBINED:
Net practice revenue .............................. $3,703,430 $4,515,019 $5,576,059 $3,529,242
Amounts contractually retained by the P.A.s ......... 3,030,126 4,001,314 4,286,231 1,057,483
----------- ----------- ----------- -----------
Management fees .................................... 673,304 513,705 1,289,828 2,471,759
=========== =========== =========== ===========
Managed dental center expenses ..................... -- -- 603,138 2,023,933
----------- ----------- ----------- -----------
Net management fees .............................. $ 673,304 $ 513,705 $ 686,690 $ 447,826
=========== =========== =========== ===========
</TABLE>
Had the net profits method been in effect for all of fiscal 1995,
management fees would have been $708,336. Had the contracts and methods in
effect at the end of the year been in effect for all of fiscal 1996, management
fees would have been as follows:
<TABLE>
<S> <C>
Management fees ..................... $4,270,410
Managed dental center expenses ...... 3,303,710
-----------
Net management fees ............... $ 966,700
===========
</TABLE>
For 1994 and 1995, net management fees for practices under contract at
December 31, 1996 would have been approximately $1,500 higher and $30,200
lower, respectively, had the contracts and methods in effect at the end of the
year been in effect for all of such periods.
F-14
<PAGE>
DENTAL CARE ALLIANCE, INC.
(SUCCESSOR TO GOLDEN CARE HOLDINGS L.C.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. REVENUE RECOGNITION--(CONTINUED)
CONSULTING AND LICENSING FEES. Consulting fees related to training of
personnel and other administrative services are performed by the Company for
four Managed Dental Centers which are not serviced under the Management
Agreements (see Note 13, Subsequent Events).
The Company also provides separate licensing services to the 16 Managed
Dental Centers. The licensing agreements typically have terms of 8-25 years, in
exchange for an annual fee from each practice of approximately $9,600-$12,000
per year. As part of the licensing agreements, the Company will solicit and
negotiate managed care contracts for the practices and provide opportunities
for the licensed practices to participate in group purchasing and marketing
plans.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1995 1996
------------ ------------
<S> <C> <C>
Leasehold improvements ............ $ 45,027 $ 45,027
Office equipment .................. 20,455 24,900
Vehicles ........................... 13,901 13,901
--------- ---------
79,383 83,828
Less accumulated depreciation ...... (28,089) (43,598)
--------- ---------
$ 51,294 $ 40,230
========= =========
</TABLE>
Depreciation expense for the periods ended December 31, 1994, 1995, and
1996 was $15,150, $17,939, and $15,508, respectively.
5. OPERATING LEASES
The Company leases office space for its corporate offices and, under the
terms of certain Management Agreements, certain non-dental assets on behalf of
its Managed Dental Centers.
Future minimum lease payments under these agreements as of December 31,
1996 are:
1997 ....................................................... $ 81,134
1998 ....................................................... 76,921
1999 ....................................................... 75,918
2000 ....................................................... 71,611
2001 ....................................................... 73,904
---------
$379,488
=========
Operating lease expense for the periods ended December 31, 1994, 1995, and
1996 was $28,104, $48,079, and $47,725, respectively.
F-15
<PAGE>
DENTAL CARE ALLIANCE, INC.
(SUCCESSOR TO GOLDEN CARE HOLDINGS L.C.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1995 1996
---------- ---------
<S> <C> <C>
Note payable to financial institution, interest at prime plus 1% (9.5%
and 9.25% at December 31, 1995 and 1996, respectively), principal
and interest payable monthly, maturing in October 1999, secured by
dental equipment and the other business assets of the Company ............ $ 78,834 $57,805
Note payable to financial institution, interest at prime plus 1% (9.5%
and 9.25% at December 31, 1995 and 1996, respectively), principal
and interest payable monthly, maturing in August 1999, unsecured ......... 76,667 53,017
$60,000 line of credit to financial institution, secured principal payable
due on demand, interest paid quarterly at 9.25% per year until first
change date then rate will be prime plus 1%, guaranteed by the
Company's President and Chief Executive Officer ........................ -- 57,260
$40,000 line of credit to financial institution maturing March 26, 1997,
secured by a money market account of the Company's President and
Chief Executive Officer, principal due on demand, interest paid
quarterly at 7.25% per year until first change date than rate will be
prime plus 1% ............................................................ -- 39,899
Other ..................................................................... 8,244 6,021
--------- ---------
163,745 214,002
Less current portion ...................................................... 56,138 173,652
--------- ---------
$107,607 $40,350
========= =========
</TABLE>
Both lines matured in March 1997, continue to be funded and are due on
demand under substantially the same terms and conditions.
Future debt payments as of December 31, 1996 are:
1997 ..................................................... $173,652
1998 ..................................................... 21,262
1999 ..................................................... 19,088
---------
$214,002
=========
7. INCOME TAXES
As described in Note 1, during fiscal 1994, 1995 and through October 23,
1996, the Company consisted of a group of Limited Liability Corporations
("LLCs") with one subsidiary operating as a C Corporation in 1994. As such, the
consolidated accounts reflect a tax provision in 1994 only for the operations
of the C Corporation. Because the operations of the C Corporation were assigned
to one of the LLCs in late 1994 no tax provision is reflected in 1995. As a
result of the Reorganization on October 23, 1996, a deferred tax liability of
$17,500, included in other current liabilities, was established
F-16
<PAGE>
DENTAL CARE ALLIANCE, INC.
(SUCCESSOR TO GOLDEN CARE HOLDINGS L.C.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. INCOME TAXES--(CONTINUED)
to account for the differences between the book and tax basis of assets,
primarily property and equipment, at the time of conversion from a limited
liability corporation to a C Corporation. This deferred tax liability at
December 31, 1996 was adjusted to $15,600 as a result of changes in the book
and tax basis during the two months ended December 31, 1996.
The provision for income tax related to the C Corporation for the period
October 23, 1996 through December 31, 1996 consists of the following:
<TABLE>
<S> <C>
Current:
Federal .................................................. $17,000
State .................................................. 2,900
Deferred--Federal ......................................... 15,600
--------
Total ..................................................... $35,500
========
</TABLE>
The Company's effective tax rate of 38% (for the two month period ended
December 31, 1996) is greater than the federal statutory rate of 34% primarily
due to the impact of state income taxes, net of federal tax benefit.
A pro forma provision for income taxes for the periods ended December 31,
1994, 1995 and through October 23, 1996 has been included in the financial
statements to reflect net income had it been calculated on a basis of a C
Corporation, based on the combined statutory federal and state income tax rates
for those periods, adjusted for minority interest.
8. MANDATORILY REDEEMABLE PREFERRED STOCK AND COMMON STOCK
Mandatorily redeemable preferred stock. On October 25, 1996, the Company
executed a subscription agreement which provided for the issuance of $1.5
million (15,000 shares at $100/share) in mandatorily redeemable preferred
stock. Under the terms of that agreement, $500,000 of preferred stock was
issued on October 25, 1996 and $1,000,000 was issued on December 31, 1996.
Proceeds of this issuance are reflected net of $105,000 of related offering
costs paid under the advisory agreement described in Note 10.
The Company had authorized 15,000 shares of Series A Convertible Preferred
Stock with a par value of $0.01 per share. The preferred stock accrues
cumulative dividends at $8/share, has voting and preemptive rights, adjustments
for dilutive effects and liquidation preferences equal to $100/share plus
accrued unpaid dividends. Dividends are payable in cash or, at holders' option,
one-half in cash and one-half in common stock. Prior to the earlier of (i) a
qualified initial public offering ("IPO") or (ii) April 25, 1998 (collectively
the "Reset Period"), each share of the preferred stock is convertible into
43.6239 shares of common stock, unless the Company's annual revenue (based upon
the two most recent quarters prior to an IPO) equals or exceeds $15 million
("Revenue Factor"). Subsequent to the Reset Period, or in the event the revenue
factor exceeds $15 million, the conversion ratio is reduced to 29.1098 shares
of common stock. All of the outstanding preferred stock converts into common
stock ("mandatory conversion") upon either an IPO or, at the Company's option,
upon a default as further defined in the agreement, in accordance with the
ratios described above. Also in connection with the Preferred Stock Sale, the
Company agreed to indemnify the Stockholders against certain claims and
liabilities, including claims and liabilities arising under the securities
laws.
F-17
<PAGE>
DENTAL CARE ALLIANCE, INC.
(SUCCESSOR TO GOLDEN CARE HOLDINGS L.C.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. MANDATORILY REDEEMABLE PREFERRED STOCK AND COMMON STOCK--(CONTINUED)
Anytime after October 25, 2001, the preferred stockholder, or anytime
after October 25, 2002, the Company may compel the redemption, for cash, of all
or any of the outstanding preferred stock. The preferred stock shall be
redeemed at $100/share plus accrued unpaid dividend. The redemption price is
payable over a two year period from the date of redemption, with payment in
four equal semi-annual installments without interest. The terms of the
preferred stock also provide for mandatory redemption by the holders in the
event the Corporation has undertaken certain defined actions or transactions
deemed unfavorable to the holders. The Company is accreting from the issuance
price less related offering costs to the stated redemption value of $1.5
million over the five year holding period to October 2001.
COMMON STOCK WITH PUT RIGHTS. In January 1994, GCH sold to a third party
an owners interest equivalent to 13%. In connection with the sale of this
owners interest, the owner became a director of the Company and the Company
attached certain put rights which are exercisable after January 1, 2001 if the
Company has not completed a public offering of its common stock by that date.
The per share price applicable to the "put rights" is 6 times pre-tax net
income for the calendar year immediately preceding the exercise of the put
times the ownership percentage that will be put back to the Company.
Concurrent with the Reorganization, this ownership interest was converted
to 530,010 shares of common stock of the Company with put rights which are
equivalent to those described above. As of December 31, 1995 and 1996 the
redemption value of these put rights has been reclassified to temporary equity,
from permanent equity on the Company's balance sheet.
9. EMPLOYEE BENEFITS
On January 26, 1994 and October 25, 1996, the Company issued to one of its
officers warrants to purchase 81,540 shares of stock (at each grant date), with
an exercise price at the then fair market value (aggregate value of $147,768
and $125,000 respectively) of the stock, as determined by an independent third
party appraisal. The options granted in January 1994 vest ratably over a period
of three years from the grant date. Of the October 1996 warrants, 61,155 shares
vested upon grant date and the remaining 20,385 shares vested in January 1997.
All such warrants were exercised in February 1997, and the exercise price was
funded by an interest bearing note from the Company. This interest bearing note
has been offset against additional paid-in capital in shareholders' equity at
June 30, 1997.
On January 21, 1997, the Company issued a stock option for 49,576 shares
of stock to another officer of the Company which are exercisable, in whole or
in part, immediately. The exercise price is fair market value on the grant date
($1.53 per share). In no event shall this option be exercisable after January
21, 2002.
F-18
<PAGE>
DENTAL CARE ALLIANCE, INC.
(SUCCESSOR TO GOLDEN CARE HOLDINGS L.C.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. EMPLOYEE BENEFITS--(CONTINUED)
The following table summarizes the Company's stock option activity:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE FAIR VALUE OF
SHARES EXERCISE PRICE OPTIONS GRANTED
----------- ------------------ ----------------
<S> <C> <C> <C>
Outstanding at December 31, 1993 ...... -- --
Exercisable at December 31, 1993 ...... -- --
Granted during 1994 .................. 81,540 $1.81 $1.61
Exercised during 1994 .................. -- --
Outstanding at December 31, 1994 ...... 81,540 $1.81
Exercisable at December 31, 1994 ...... 20,385 $1.81
Granted during 1995 .................. 137,803 $1.74 $1.55
Exercised during 1995 .................. -- $ --
Outstanding at December 31, 1995 ...... 219,343 $1.77
Exercisable at December 31, 1995 ...... 125,572 $1.77
Granted during 1996 .................. 81,540 $1.53 $1.36
Exercised during 1996 .................. -- $ --
Outstanding at December 31, 1996 ...... 300,883 $1.70
Exercisable at December 31, 1996 ...... 207,112 $1.70
Granted during 1997 .................. 49,576 $1.53 $1.37
Exercised during 1997 .................. 247,882 $1.70
Outstanding at June 30, 1997 ......... 102,577 $1.64
Exercisable at June 30, 1997 ......... 49,576 $1.53
</TABLE>
The following table summarizes the stock options outstanding and
exercisable at December 31, 1996 and June 30, 1997:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
-------------------------------------- ---------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE OF CONTRACTUAL EXERCISE OF EXERCISE
PRICE OPTIONS LIFE PRICE OPTIONS PRICE
------------- --------- ------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1996 ...... $1.53-$1.81 300,883 4 months $1.70 207,112 $1.70
June 30, 1997 ......... $1.53-$1.74 102,577 5 months $1.64 49,576
$1.53
</TABLE>
F-19
<PAGE>
DENTAL CARE ALLIANCE, INC.
(SUCCESSOR TO GOLDEN CARE HOLDINGS L.C.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. EMPLOYEE BENEFITS--(CONTINUED)
The Company has adopted the disclosure only provisions of SFAS No. 123 for
employee options. Accordingly, no compensation expense has been recognized for
its stock option plan(s). In the event that options contingent upon an initial
public offering are issued to certain P.A.s (see Note 14), such options will be
accounted for under SFAS No. 123. Had compensation cost for the stock option
plan(s) been determined based on the fair value at the date of grant for awards
in 1994, 1995 and 1996 and the six month period ending June 30, 1997 consistent
with the provisions of SFAS 123, the Company's net income and earnings per
share would approximate the following pro forma amounts:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------- -----------------
1994 1995 1996 1997
--------- ------------- ---------- -----------------
<S> <C> <C> <C> <C>
Pro forma net income (loss) ......... $66,621 $(16,593) $141,304 $51,426
======== ========= ========= ========
Pro forma net income per share ...... $ .03 $ .01
========= ========
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the minimum value method with the following weighted average assumptions:
no dividend yield, no expected volatility, risk-free interest rates ranging
from 5.53%--6.23%, and average expected lives of two years.
10. ADVISORY SERVICES
The Company entered into an exclusive corporate development advisory
agreement (the Agreement) in September 1995 under which the Company is
committed to the following:
A retainer each quarter equal to the greater of $4,000 or 6 percent of the
Company's quarterly income before income tax expenses in excess of $75,000
beginning February 1, 1996 which is recorded as a component of general and
administrative expenses.
In addition, the Company granted the corporate development advisors (the
"Advisors") warrants to purchase an (84,802 shares) ownership interest at a
exercise price of $20,000 for services rendered in connection with business
development and other financial management advisory services. The warrants were
granted below fair market value and accordingly, the Company has recognized a
charge of $127,768 and has recorded the warrants as a component of
shareholders' equity. These warrants were exercised in June 1997. Furthermore,
upon the occurrence of an M&A Transaction, as defined in the Agreement, the
Advisor is entitled to a fee of $100,000 and five year warrants to purchase a
number of shares of common stock equal to $250,000 divided by the lesser of 80
percent of the price per share of the transaction, as defined, or $20 million
divided by the number of fully diluted shares outstanding just prior to the M&A
Transaction.
The Agreement was amended on April 25, 1996 to provide for payment of fees
in relation to Capital Raising Transactions, as defined, of between 4% and 7%
of the proceeds. As a result of the issuance of the mandatorily redeemable
preferred stock described in Note 8 a fee of $105,000 was paid to the advisor.
Upon consummation of an Offering, the Company has committed to pay the Advisors
a fee of $100,000 and to issue a 10 year warrant to purchase a number of shares
of common stock equal to $350,000 divided by the offering price of the common
stock, at an exercise price equal to the offering price, if and when an
Offering is completed. In August 1997, the Company agreed to issue warrants to
F-20
<PAGE>
DENTAL CARE ALLIANCE, INC.
(SUCCESSOR TO GOLDEN CARE HOLDINGS L.C.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. ADVISORY SERVICES--(CONTINUED)
the Advisors to purchase 53,001 shares of common stock at an exercise price of
$92,355, which will vest only upon the completion of an Initial Public Offering
(Offering) for services rendered in connection with the Offering. The agreement
for these warrants also provides that the Advisor will receive the earlier of
the M&A fees and warrants or the Offering fees and warrants, not both. The fair
value of these warrants which is anticipated to be significantly in excess of
$100,000, less the related exercise price, are anticipated to be offset against
the proceeds of the related Offering.
11. RELATED PARTY TRANSACTIONS
The Company's President, Chief Executive Officer and majority shareholder
owns or controls entities which do business with the Company or its Managed
Dental Centers. The Managed Dental Centers incurred rent totaling $77,671 and
$87,756 for the years ended December 31, 1994 and 1995, respectively, and
$97,912 for the ten months ended October 31, 1996, payable to such entities.
The Company incurred rent of $10,918 for the two months ended December 31, 1996
payable to such entities. During 1996, the Company paid for, in the form of
advances to the Company's President, certain laboratory costs of a related
party. This amount of $60,000, which is personally guaranteed by the Company's
President, has been reflected in other assets at December 31, 1996 as such
amounts have been structured as a demand note. The Managed Dental Centers have
also incurred capital lease obligations payable to a related entity owned 33%
by the Company's President totaling approximately $119,000 and $108,000 as of
December 31, 1995 and 1996, respectively. Such leases are obligations of the
Managed Dental Centers and not of the Company. Interest expense on such
obligations was approximately $0, $16,000, and $21,000 for the years ending
December 31, 1994, 1995, and 1996, respectively.
12. CONCENTRATIONS OF CREDIT RISK
As described in Note 1, a majority of the Managed Dental Centers are owned
by PAs commonly controlled by the same individual. All P.A.s and the commonly
controlled P.A.s are indebted to the Company as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 JUNE 30, 1997
------------------- --------------
FINANCIAL FINANCIAL
STATEMENT STATEMENT
BALANCE BALANCE
------------------- --------------
<S> <C> <C>
TOTAL ALL P.A.S:
Consulting and license fees receivable .................. $ 59,000 $ 58,352
Management fee receivable from P.A.s ..................... 397,441 576,456
Advances to P.A.s ....................................... 16,454 287,127
Current portion of long-term notes receivable ............ 68,460 73,266
Long-term notes receivable from P.A.s,
less current portion .................................... 129,935 100,490
Consulting and license fees receivable, non current ...... 251,925 300,000
--------- -----------
$923,215 $1,395,691
========= ===========
AMOUNT OWED BY THE COMMONLY CONTROLLED P.A.S: ............ $647,251 $1,035,061
========= ===========
</TABLE>
This individual has personally guaranteed this indebtedness in the event
the receivable cannot be paid by the P.A.s and pledged the ownership interest
rights of P.A.s subordinate to acquisition debt.
F-21
<PAGE>
DENTAL CARE ALLIANCE, INC.
(SUCCESSOR TO GOLDEN CARE HOLDINGS L.C.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. CONCENTRATIONS OF CREDIT RISK--(CONTINUED)
This represents a concentration of credit risk and exposes the Company to risk
of loss for these amounts should the P.A.s and the individual be unable to pay
its debts. Relevant financial data on this P.A.'s practices and the Company's
commitments on behalf of other P.A.s for each period end are as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FOR THE YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------- -----------------
1994 1995 1996 1997
--------- ------------ ------------ -----------------
<S> <C> <C> <C> <C>
Net practice revenue ......... $75,292 $1,115,011 $4,116,938 $2,699,551
Amounts contractually retained
by the P.A. ............... 71,825 983,864 3,107,861 701,884
-------- ----------- ----------- -----------
Management fees ............ $ 3,467 $ 131,147 $1,009,077 $1,997,667
======== =========== =========== ===========
</TABLE>
Additionally, the Company's President, Chief Executive Officer and
majority shareholder has guaranteed (subordinate to the pledge of assets of the
practice and the guarantee of the P.A. and its owner) a portion of the
financing related to the Managed Dental Centers which are owned and controlled
by one of the P.A.s. As of December 31, 1996, this amount was approximately
$1,259,000. During the period ended June 30, 1997, the Company guaranteed
(subordinate to the pledge of assets of the practice and the guarantee of the
P.A. and its owner) a portion of the financing ($450,000) related to the
Managed Dental Center which is owned and controlled by one of the P.A.s.
13. COMMITMENTS AND CONTINGENCIES
The Company has entered into employment agreements with three of its
officers, one of whom is also the majority shareholder of the Company. The
terms of the agreements are from four to five years and initially expire in
1998 and 2001.
The Company has entered into a staff leasing agreement whereby all of the
Company's corporate employees and, on behalf of the Managed Dental Centers, all
of the non-dental employees of the Dental Centers are leased. The lease
provides for a 30 day cancellation period by the Company.
14. SUBSEQUENT EVENTS
NON-DENTAL ASSET ACQUISITIONS AND MANAGEMENT CONTRACTS
In April 1997, the Company acquired approximately $200,000 of non-dental
assets and executed a 25 year Administrative Services Agreement with a dental
practice located in Temple Terrace, Florida. As part of the debt guaranty for
the P.A. owner, the Company has pledged as collateral the non-dental assets
acquired. Unaudited net practice revenue of the dental practice was
approximately $950,000 for the year ended December 31, 1996. The Management
Agreement executed is a net revenue contract. The P.A. owner had eleven P.A.s
under contract with the Company at the date of this transaction. In connection
with the execution of this Management Agreement, the Company has agreed to
issue options of common stock to the P.A. owner in the amount of $82,000, at an
exercise price equal to the IPO price, when and if an Offering is completed,
exercisable for a period of six months.
In July 1997, the Company's President and controlling shareholder acquired
approximately $2.4 million of non-dental assets and concurrently, the Company
executed a 25 year Management
F-22
<PAGE>
DENTAL CARE ALLIANCE, INC.
(SUCCESSOR TO GOLDEN CARE HOLDINGS L.C.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. SUBSEQUENT EVENTS--(CONTINUED)
Agreement with the dental practice located in Flint, Michigan. Unaudited net
practice revenue of the dental practice was approximately $4 million for the
period ended December 31, 1996. The Management Agreement executed is under the
net revenue contract. On September 30, 1997, the Company's President and
controlling shareholder sold his interest in the Flint practice to the minority
shareholder of the Flint P.A.
In July 1997, the Company acquired four Management Agreements for
$846,000, including settlement of outstanding receivables for consulting
services of $300,000, wherein it will provide management services to the
related practices for 8 years. The P.A.s were previously subject to consulting
and licensing agreements. The acquired Administrative Service Agreements are
executed under the net revenue contract. Unaudited net practice revenue of the
dental practice was approximately $3.4 million for the period ended December
31, 1996. The Company had previously recognized revenue of $40,000 in 1994,
$160,000 in 1995, $160,000 in 1996 and $53,000 for the six months ended June
30, 1997 for consulting and licensing services. The Company has agreed to
subcontract the day to day management of these four practices for eighty
percent of the net profits of the P.A., subject to certain adjustments to a
Michigan based company owned by the P.A. owner resulting, in effect, in the
acquisition of a 20% interest in the "net profits," as defined. The Company
will continue to receive license fees of $40,000 per year. The owner of the
P.A. does not own any other P.A.s currently under Management Agreements.
In August 1997, the Company acquired approximately $175,000 of non-dental
assets and executed a 25 year Management Agreement with a dental practice
located in Tallahassee, Florida. Unaudited net practice revenue of the dental
practice was approximately $900,000 for the year ended December 31, 1996. The
P.A. owner had twelve P.A.s under contract with the Company at the date of this
transaction. The Management Agreement executed is a net revenue contract. In
connection with the execution of this Management Agreement, the Company has
agreed to issue options for common stock to the P.A. owner in the amount of
$131,000 at an exercise price equal to the IPO price, when and if an Offering
is completed, exercisable for a period of six months.
In September 1997, the Company acquired non-dental assets of $120,000 and
executed a 25 year Management Agreement with a dental practice located in St.
Petersburg, Florida. Unaudited practice revenue of the dental practice was
approximately $400,000 for the year ended December 31, 1996. The new PA owner
had 13 P.A.s under contract with the Company at the date of the transaction.
The Management Agreement executed is a net revenue contract.
FINANCING
In August 1997, the Company entered into two revolving lines of credit
with a financial institution which provides for an aggregate of $1.2 million.
The Company may use up to $600,000 for the purchase of non-dental assets of
dental centers provided each borrowing is repaid within 45 days of draw down.
The remaining $600,000 may be used for general working capital needs. The
revolving lines of credit bear interest at prime plus .75% and is payable on
June 1, 1998, and contain limitations on acquisition activity without prior
approval.
OMNIBUS EXECUTIVE INCENTIVE COMPENSATION PLAN.
Concurrent with the consummation of an Offering the Company anticipates
establishing an Omnibus Executive Incentive Compensation Plan (the "Plan")
which is designed to attract and retain
F-23
<PAGE>
DENTAL CARE ALLIANCE, INC.
(SUCCESSOR TO GOLDEN CARE HOLDINGS L.C.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. SUBSEQUENT EVENTS--(CONTINUED)
executives, directors, and independent contractors ("Participants"). However
the Company is under no obligation to establish such a plan. Management
anticipates that any such options granted to non-employees will be accounted
for under FAS No. 123.
NON-QUALIFIED STOCK OPTION PLAN
Concurrent with the consummation of the Offering, the Company anticipates
establishing a stock option plan which is designed to assist the P.A.s in
attracting, retaining and properly motivating dentists and other employees of
P.A.s under contract. However the Company is under no obligation to establish
such a plan. Management anticipates that all such options will be accounted for
under FAS No. 123.
In connection with entering into the Temple Terrace, Florida and
Tallahassee, Florida Management Agreements the Company has agreed to issue to
the P.A. physician employees options to purchase 10,000 shares of stock, in the
aggregate, vesting over a 5 year period, expiring 10 years from grant date at
an exercise price equal to the IPO price, when and if an offering is completed
and certain performance based award of shares as determined at varying levels
of collected revenue, as set forth in the employment agreement. Issuance of all
such options are conditioned on the Company establishing the non-qualified
stock option plan.
F-24
<PAGE>
=============================== ================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THIS OFFERING, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES, OR AN OFFER TO SELL
OR SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY JURISDICTION WHERE,
OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH AN 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 TIME SUBSEQUENT TO THE DATE HEREOF.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary ..................... 3
Risk Factors ........................... 8
The Company .............................. 17
Relationship Between the Company
and the PAs ........................... 17
Use of Proceeds ........................ 18
Dividend Policy ........................ 18
Dilution ................................. 19
Capitalization ........................... 20
Selected Consolidated Financial Data ..... 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations ........................ 23
Business ................................. 29
Management .............................. 43
Principal and Selling Stockholders ...... 48
Certain Transactions ..................... 49
Description of Capital Stock ............ 51
Shares Eligible for Future Sale ......... 55
Underwriting ........................... 56
Legal Matters ........................... 58
Experts ................................. 58
Available Information .................. 58
Index to Financial Statements ............ F-1
</TABLE>
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS 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.
2,000,000 SHARES
[LOGO]
COMMON STOCK
-------------------
P R O S P E C T U S
-------------------
RAYMOND JAMES &
ASSOCIATES, INC.
WILLIAM BLAIR & COMPANY
, 1997
=============================== ================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses (other than underwriting discounts and commissions) of
the sale of the shares of Common Stock are as follows:
<TABLE>
<S> <C>
SEC registration fee ............................. $ 9,061
NASD filing fee ................................ 5,000
Nasdaq National Market listing fee .............. 30,500
Legal fees and expenses .......................... 400,000*
Blue Sky fees and expenses ....................... 15,000
Accounting fees and expenses .................... 300,000*
Printing and engraving expenses ................. 100,000*
Transfer agent and registrar fees .............. 5,000
Miscellaneous fees and expenses ................. 198,429*
----------
Total ......................................... $1,100,000*
==================
</TABLE>
- ----------------
* Estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Certificate and Bylaws will effectively provide that the
Registrant may indemnify to the full extent permitted by Delaware Law,
including Section 145 of Delaware Law ("Section 145") thereunder. In addition,
the Registrant's Certificate will eliminate personal liability of its directors
to the full extent permitted by Section 102(b)(7) of Delaware Law ("Section
102(b)(7)").
Section 145 permits a corporation to indemnify its directors, officers,
employees and agents against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by them
in connection with any action, suit or proceeding brought by a third party if
such directors or officers acted in good faith and in a manner they 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 reason to believe
their conduct was unlawful. In a derivative action, indemnification may be made
for expenses actually and reasonably incurred by directors, officers, employees
and agents, in connection with the defense or settlement of an action or suit
and with respect to a matter as to which they shall have acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interest of the corporation, except that no indemnification shall be made if
such person shall have been adjudged liable to the corporation, unless and only
to the extent that the court in which the action or suit was brought shall
determine upon application that the defendant officers or directors are
reasonably entitled to indemnity for such expenses despite such adjudication of
liability.
Section 102(b)(7) provides that a corporation may eliminate or limit the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for willful or
negligent conduct in paying dividends or repurchasing stock out of other than
lawfully available funds or (iv) for any transaction from which the director
derived an improper personal benefit. No such provisions shall eliminate or
limit the liability of a director for any act or omission occurring prior to
the date when such provision becomes effective.
The Company is entering into Indemnification Agreements with its directors
and executive officers in which the Registrant will agree to indemnify such
persons to the fullest extent now or hereafter
II-1
<PAGE>
permitted by Delaware Law. The Company may also obtain a liability insurance
policy for its officers and directors, which may extend to, among other things,
liabilities under the Securities Act.
The indemnification provided by Delaware Law and the Certificate and
Bylaws is not exclusive of any other rights to which a director or officer may
be entitled. The general effect of the foregoing provisions may be to reduce
the circumstances in which an officer or director may be required to bear the
economic burden of the foregoing liabilities and expense.
Section 9 of the Underwriting Agreement (filed as Exhibit 1.1 to this
Registration Statement) provides that the Underwriters severally and not
jointly will indemnify and hold harmless the Registrant and each director,
officer and controlling person of the Registrant from and against any liability
caused by any statement or omission in the Registration Statement, in the
Prospectus, in any Preliminary Prospectus or in any amendment of supplement
thereto, in each case to the extent that the statement or omission was made in
reliance upon and in conformity with written information furnished to the
Registrant by the Underwriters expressly for use therein.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
No securities that were not registered under the Securities Act have been
issued or sold by the Company within the past three years except as follows(1):
<TABLE>
<CAPTION>
DATE OF SALE
AMOUNT AND TYPE OF SECURITIES OR ENTITLEMENT PURCHASER(S) CONSIDERATION
- ----------------------------------------- ---------------- ----------------------------- --------------
<S> <C> <C> <C>
1,630,800 shares of Common Stock October 1996 Steven R. Matzkin (2)
1,630,800 shares of Common Stock October 1996 SRM 1993 Children's Trust (2)
530,010 shares of Common Stock October 1996 Curtis Lee Smith, Jr. (3)
Warrants to Purchase 81,540 shares of October 1996 Mitchell Olan (4)
Common Stock
81,540 shares of Common Stock October 1996 Dr. Richard Golden (5)
500 shares of Series A October 1996 Robert F. Raucci $50,000
Preferred Stock(6) Crescent International
Holdings, Inc.
14,500 shares of Series A December 1996 Crescent International $1.45 million
Preferred Stock(6) Holdings Limited
Robert F. Raucci
81,540 shares of Common Stock October 1996 Dennis Corona (7)
40,770 shares of Common Stock October 1996 Frank Wolicki (8)
Option to purchase 49,576 shares of January 1997 David P. Nichols (9)
Common Stock
81,540 shares of Common Stock February 1997 Mitchell Olan (10)
Option to purchase a number of shares April 1997 Dennis Corona, DDS, P.C. (11)
equivalent to $82,000 divided by the
initial public offering price per share
42,401 shares of Common Stock June 1997 The Nassau Group, Inc. $10,000(12)
42,401 shares of Common Stock June 1997 JF Lavelle $10,000(13)
Option to purchase a number of shares August 1997 Dennis A. Corona, DDS, P.C. (11)
equivalent to $131,250 divided by
the initial public offering price
per share
</TABLE>
- ----------------
(1) Unless otherwise indicated, all share numbers refer to post-Stock Split
Shares.
(2) Such shares were issued to the founding shareholders when the Company was
incorporated in exchange for the membership interests in Golden Care
Holdings, L.C., Golden Care Network, L.C. and Prophet.
II-2
<PAGE>
(3) Such securities were purchased for $750,000 in cash and Mr. Smith's
promissory note in the amount of $1.75 million.
(4) Such Warrants were issued pursuant to an amendment to Mr. Olan's
employment agreement.
(5) Such shares were issued in exchange for the membership interest held by
Dr. Golden in Prophet .
(6) The Nassau Group, Inc. acted as placement agent for the sale of Series A
Preferred Stock, for which it received a fee of $105,000. All Series A
Preferred Stock will be converted into 654,359 shares of Common Stock upon
consummation of the Offering.
(7) Such shares were issued in consideration for the modification of the terms
of certain management agreements between the Company and Mr. Corona.
(8) Such shares were issued in exchange for Mr. Wolicki's rights to receive
management fees of Profit.
(9) Such options were granted pursuant to Mr. Nichols' employment agreement
with an exercise price of $1.53 per share.
(10) Such shares were issued pursuant to warrants to purchase 81,540 shares of
Common Stock granted to Mr. Olan on January 26, 1994 and warrants to
purchase 81,540 shares of Common Stock granted to Mr. Olan on October 25,
1996, respectively. Mr. Olan issued promissory notes to the Company in the
amounts of $147,768 and $125,000, respectively in payment of such shares.
(11) Granted in connection with this PA's purchase of a dental practice and
exercisable only upon consummation of an initial public offering at the
public offering price per share.
(12) Such shares were issued pursuant to warrants to purchase 40,770 shares of
Common Stock granted to the Nassau Group, Inc. in September 1995.
(13) Such shares were issued pursuant to warrants to purchase 40,770 shares of
Common Stock granted to Mr. Lavelle in September 1995.
The aforementioned issuances and sales were made in reliance upon the
exemption from the registration provisions of the 1933 Act afforded by Section
4(2) thereof and/or Regulation D promulgated thereunder, as transactions by an
issuer not involving a public offering. The purchasers of the securities
described above acquired them for their own account and not with a view to any
distribution thereof to the public. The certificates evidencing the securities
bear legends stating that the securities may not be offered, sold or
transferred other than pursuant to an effective registration statement under
the 1933 Act, or an exemption from such registration requirements. The Company
will place stop transfer instructions with its transfer agent with respect to
all such securities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following documents are filed as exhibits to this Registration
Statement:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement.***
3.1 Form of Amended and Restated Articles of Incorporation of the Company.***
3.2 Form of Amended and Restated Bylaws of the Company.***
4.1 See Exhibits 3.1 and 3.2 for provisions in the Company's Articles of Incorporation and Bylaws
defining the rights of holders of the Company's Common Stock.***
5.1 Opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. with respect to legality
of the Common Stock being issued.*
10.1 Form of Indemnification Agreement between the Company and each of its directors and
executive officers.***
10.2 Form of Standard Management Agreement.***
10.3 Contribution Agreement among the Company, Dental Care Alliance of Michigan, Inc. and
Dental Care Alliance of Florida, Inc.*
10.4 Management Agreement between Dr. Joseph Gaeta and the Company.*
10.5 Administrative Service Subcontract Agreement between the Company and Johnson Dental
Development Corporation.**
10.6 Administrative Services Agreement between the Company and Eight Mile Dental, P.C.;
Gratiot Avenue Dental, P.C.; Wayne Road Dental, P.C. and Washington Boulevard Dental,
P.C.***
10.7 Form of License Agreement.***
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------- -----------------------------------------------------------------------------------------------
<S> <C>
10.8 Employment Agreement dated as of October 25, 1996 between the Company and Dr. Steven
R. Matzkin.**
10.9 Employment Agreement dated as of October 25, 1996 between the Company and Mitchell B.
Olan.***
10.10 Employment Agreement dated as of January 21, 1997 between the Company and David
Nichols.***
10.11 Equity Holders Agreement dated as of October 25, 1996 between the Company and Mitchell
B. Olan.**
10.12 Equity Holders Agreement dated as of April 30, 1997 between the Company and J. Francis
Lavelle.**
10.13 Equity Holders Agreement dated as of April 30, 1997 between the Company and The Nassau
Group, Inc.**
10.14 Option Agreement dated as of January 21, 1997 between the Company and David P.
Nichols.***
10.15 Form of Warrant between the Company and The Nassau Group, Inc.***
10.16 Form of IPO Warrant between the Company and The Nassau Group, Inc.***
10.17 Lease Agreement dated as of April 9, 1994 between the Company and Charles E. Githler, III,
as Managing Agent for Owner, J. Kevin Drake, as Trustee Under Trust Agreement dated
April 15, 1991.**
10.18 Stockholders' Agreement dated as of October 25, 1996 among the Company, Steven R.
Matzkin, Curtis Lee Smith, Jr., Robert F. Raucci and Crescent International Holdings, Limited,
as amended.***
10.19 Omnibus Executive Incentive Compensation Plan.*
10.20 Form of 1997 Non-Qualified Stock Option Plan.*
10.21 Promissory Note in the original principal amount of $147,768 dated as of February 13, 1997
from Mitchell B. Olan to the Company.**
10.22 Agreement for Services dated as of June 1, 1997 between the Company and Modern Employer,
Inc.**
10.23 Business Loan Agreement dated August 15, 1997 between the Company and Barnett Bank.***
10.24 Letter Agreement dated August 1997 between Nassau and the Company.***
10.25 Acknowledgement and Option Agreement between Dennis Corona and Andrew D.
Levine.***
10.26 Acknowledgement and Option Agreement between Dennis Corona and Jay Walton.***
11.1 Statement re: Computation of Earnings Per Share.***
16.1 Letter of Arthur Andersen LLP re: change in independent certified public accountants.***
21.1 List of subsidiaries of the Company.***
23.1 Consent of Price Waterhouse LLP.***
23.2 Consent of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. (included in its opinion
to be filed as Exhibit 5.1).*
24.1 Powers of Attorney of Directors and Executive Officers (included on the Signature Page of
this Registration Statement).**
24.2 Power of Attorney of Robert F. Raucci.***
27.1 Financial Data Schedule for the year ended December 31, 1996.**
27.2 Financial Data Schedule for the six months ended June 30, 1997.**
</TABLE>
- ----------------
*To be filed by amendment.
**Previously filed.
***Filed herewith.
II-4
<PAGE>
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under Item 14
above, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment 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 Act and will be governed by the final
adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities Act of
1933, 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.
(ii) For the purpose of determining any liability under the Securities
Act of 1933, 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-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Amendment No. 1 to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Sarasota,
State of Florida, on this 7 day of October, 1997.
DENTAL CARE ALLIANCE, INC.
By: /s/ STEVEN R. MATZKIN
Steven R. Matzkin
Chairman of the Board, President
and
Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Amendment No. 1
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------- --------------------------------- ----------------
<S> <C> <C>
/s/ STEVEN R. MATZKIN Chairman of the Board, Chief October 7, 1997
- ------------------------------- Executive Officer and President
Steven R. Matzkin
/s/ DAVID P. NICHOLS Chief Financial Officer October 7, 1997
- ------------------------------- (principal accounting officer)
David P. Nichols
/s/ MITCHELL B. OLAN Vice President, Chief Operating October 7, 1997
- ------------------------------- Officer and Director
Mitchell B. Olan
/s/ CURTIS LEE SMITH, JR. Director October 7, 1997
- -------------------------------
Curtis Lee Smith, Jr.
/s/ ROBERT F. RAUCCI Director October 7, 1997
- -------------------------------
Robert F. Raucci
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- -------------------------------------------------------------------------- -------------
<S> <C> <C>
1.1 Form of Underwriting Agreement.
3.1 Form of Amended and Restated Articles of Incorporation of the Company.
3.2 Form of Amended and Restated Bylaws of the Company.
4.1 See Exhibits 3.1 and 3.2 for provisions in the Company's Articles of
Incorporation and Bylaws defining the rights of holders of the Company's
Common Stock.
10.1 Form of Indemnification Agreement between the Company and each of its
directors and executive officers.
10.2 Form of Standard Management Agreement.
10.6 Administrative Services Agreement between the Company and Eight Mile
Dental, P.C.; Gratiot Avenue Dental, P.C.; Wayne Road Dental, P.C. and
Washington Boulevard Dental, P.C.
10.7 Form of License Agreement.
10.9 Employment Agreement dated as of October 25, 1996 between the Company
and Mitchell B. Olan.
10.10 Employment Agreement dated as of January 21, 1997 between the Company and
David Nichols.
10.14 Option Agreement dated as of January 21, 1997 between the Company and
David P. Nichols.
10.15 Form of Warrant between the Company and The Nassau Group, Inc.
10.16 Form of IPO Warrant between the Company and The Nassau Group, Inc.
10.18 Stockholders' Agreement dated as of October 25, 1996 among the Company,
Steven R. Matzkin, Curtis Lee Smith, Jr., Robert F. Raucci and Crescent
International Holdings, Limited, as amended.
10.23 Business Loan Agreement dated August 15, 1997 between the Company and
Barnett Bank.
10.24 Letter Agreement dated August 1997 between Nassau and the Company.
10.25 Acknowledgement and Option Agreement between Dennis Corona and Andrew
D. Levine.
10.26 Acknowledgement and Option Agreement between Dennis Corona and Jay
Walton.
11.1 Statement re: Computation of Earnings Per Share.
16.1 Letter of Arthur Andersen LLP re: change in independent certified public
accountants.
21.1 List of subsidiaries of the Company.
23.1 Consent of Price Waterhouse LLP.
24.2 Power of Attorney of Robert F. Raucci.
</TABLE>
Draft 9/30/97
_______________ Shares
DENTAL CARE ALLIANCE, INC.
Common Stock
______________________
UNDERWRITING AGREEMENT
St. Petersburg, Florida
, 1997
Raymond James & Associates, Inc.
William Blair & Company, L.L.C.
As Representatives of the Several Underwriters
c/o Raymond James & Associates, Inc.
880 Carillon Parkway
St. Petersburg, Florida 33716
Ladies & Gentlemen:
Dental Care Alliance, Inc., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
an aggregate of ______ shares of common stock, $0.01 par value per share (the
"Common Stock"), of the Company, to the several Underwriters named in Schedule I
hereto (the "Underwriters"). Such _______ shares of Common Stock to be sold by
the Company are hereinafter referred to as the "Firm Shares". In addition, the
Company and certain Stockholders of the Company (the "Selling Stockholders")
have agreed to sell to the Underwriters, upon the terms and conditions set forth
herein, up to an additional _______ shares in the aggregate (the "Additional
Shares") of the Common Stock to cover over-allotments by the Underwriters, if
any. The Firm Shares and the Additional Shares are hereinafter collectively
referred to as the "Shares."
The Company and the Selling Stockholders wish to confirm as follows
their agreement with you and the other several Underwriters, on whose behalf you
are acting, in connection with the several purchases of the Shares from the
Company and the Selling Stockholders.
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-1 (File
<PAGE>
-2-
No. 333-_______), including a prospectus subject to completion, relating to the
Shares. Such registration statement, as amended at the time when it becomes
effective and as thereafter amended by post-effective amendment, is referred to
in this Agreement as the "Registration Statement." The prospectus in the form
included in the Registration Statement, or, if the prospectus included in the
Registration Statement omits information in reliance upon Rule 430A under the
Act and such information is included in a prospectus filed with the Commission
pursuant to Rule 424(b) under the Act or as part of a post-effective amendment
to the Registration Statement after the Registration Statement becomes
effective, the prospectus as so filed is referred to in this Agreement as the
"Prospectus." If the Company elects to rely on Rule 434 under the Act, all
references to the Prospectus shall be deemed to include, without limitation, the
form of prospectus and the term sheet contemplated by Rule 434, taken together,
provided to the Underwriters by the Company in reliance on Rule 434 under the
Act (the "Rule 434 Prospectus"). If the Company files another registration
statement with the Commission to register a portion of the Shares pursuant to
Rule 462(b) under the Act (the "Rule 462 Registration Statement"), then any
reference to "Registration Statement" herein shall be deemed to include the
registration statement on Form S-1 (File No. 333-_____) and the Rule 462
Registration Statement, as each such registration statement may be amended
pursuant to the Act. The prospectus subject to completion in the form included
in the Registration Statement at the time of the initial filing of such
Registration Statement with the Commission and as such prospectus is amended
from time to time until the date of the Prospectus, are collectively referred to
in this Agreement as the "Prepricing Prospectus." For purposes of this
Agreement, all references to the Registration Statement, the Prospectus, any
Prepricing Prospectus, any Rule 434 Prospectus, any Rule 462 Registration
Statement or any amendment or supplement to any of the foregoing shall be deemed
to include the respective copies thereof filed with the Commission pursuant to
the Commission's Electronic Data Gathering Analysis and Retrieval System
("Edgar").
2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees to sell
the Firm Shares to the Underwriters and, upon the basis of the representations,
warranties and agreements of the Company herein contained and subject to all the
terms and conditions set forth herein, each Underwriter agrees, severally and
not jointly, to purchase from the Company at a purchase price of $_____ per
Share (the "purchase price per Share"), the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto (or such number of
Firm Shares as adjusted pursuant to Section 11 hereof).
The Company and the Selling Stockholders hereby also agree, severally
and not jointly, to sell to the Underwriters, and upon the basis of the
representations, warranties and agreements of the Company and the Selling
Stockholders herein contained and subject to all the terms and conditions set
forth herein, the Underwriters shall have the right for 30 days from the date of
the Prospectus to purchase from the Company and the Selling Stockholders up to
___ Additional Shares (in accordance with Schedule II hereof) at the purchase
price per Share for the Firm Shares. The Additional Shares may be purchased
solely for the purpose of covering over-allotments, if any, made in connection
with the offering of the Firm Shares. If any Additional Shares are to be
<PAGE>
-3-
purchased, each Underwriter, severally and not jointly, agrees to purchase the
number of Additional Shares (subject to such adjustments as you may determine to
avoid fractional shares) which bears the same proportion to the total number of
Additional Shares to be purchased by the Underwriters as the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule I hereto (or
such number of Firm Shares as adjusted pursuant to Section 11 hereof) bears to
the total number of Firm Shares.
3. TERMS OF PUBLIC OFFERING. The Company and the Selling Stockholders
have been advised by you that the Underwriters propose to make a public offering
of their respective portions of the Shares as soon after the Registration
Statement and this Agreement have become effective as in your judgment is
advisable and initially to offer the Shares upon the terms set forth in the
Prospectus.
4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Delivery to the
Underwriters of the Firm Shares and payment therefor shall be made at the
offices of Raymond James & Associates, Inc., 880 Carillon Parkway, St.
Petersburg, Florida, at 10:00 a.m., St. Petersburg, Florida time, on , 1997 (the
"Closing Date"). The place of closing for the Firm Shares and the Closing Date
may be varied by agreement between you and the Company.
Delivery to the Underwriters of and payment for any Additional Shares
to be purchased by the Underwriters shall be made at the offices of Raymond
James & Associates, Inc., 880 Carillon Parkway, St. Petersburg, Florida, at
10:00 a.m., St. Petersburg, Florida time, on such date or dates (the "Additional
Closing Date") (which may be the same as the Closing Date but shall in not event
be earlier than the Closing Date nor earlier than three nor later than ten
business days after the giving of notice hereinafter referred to) as shall be
specified in a written notice from Raymond James & Associates, Inc. on behalf of
the Underwriters to the Company of the Underwriters' determination to purchase a
number, specified in such notice, of Additional Shares. Such notice may be given
to the Company and the Selling Stockholders by Raymond James & Associates, Inc.
at any time within 30 days after the date of the Prospectus. The place of
closing for the Additional Shares and the Additional Closing Date may be varied
by agreement among you, the Company and any of the Attorneys-in-Fact (as such
term is defined herein).
Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such denominations
as you shall request prior to 1:00 p.m., St. Petersburg, Florida time, not later
than the second full business day preceding the Closing Date or the Additional
Closing Date, as the case may be. Such certificates shall be made available to
you in St. Petersburg, Florida for inspection and packaging not later than 9:30
a.m., St. Petersburg, Florida time, on the business date immediately preceding
the Closing Date or the Additional Closing Date, as the case may be. The
certificates evidencing the Firm Shares and any Additional Shares to be
purchased hereunder shall be delivered to you on the Closing Date or the
Additional Closing Date, as the case may be, against payment of the purchase
price therefor by certified or official bank check or checks to the order of, or
by wire transfer to the account of, the Company, in same day available funds
against the delivery of the certificates for the Firm Shares and any Additional
Shares, as the case may be.
5. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company covenants and
agrees with the several Underwriters as follows:
<PAGE>
-4-
(a) The Company will use its best efforts to cause the
Registration Statement to become effective and will advise you promptly
and, if requested by you, will confirm such advice in writing (i) when
the Registration Statement has become effective and when any
post-effective amendment thereto becomes effective, (ii) if Rule 430A
under the Act is employed, when the Prospectus has been timely filed
pursuant to Rule 424(b) under the Act, (iii) of any request by the
Commission for amendments or supplements to the Registration Statement,
any Prepricing Prospectus or the Prospectus or for additional
information, (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the
suspension of qualification of the Shares for offering or sale in any
jurisdiction or the initiation of any proceeding for such purposes and
(v) within the period of time referred to in Section 5(e) below, of any
change in the Company's condition (financial or other), business,
prospects, properties, net worth or results of operations, or of any
event that comes to the attention of the Company that makes any
statement made in the Registration Statement or the Prospectus (as then
amended or supplemented) untrue in any material respect or that
requires the making of any additions thereto or changes therein in
order to make the statements therein not misleading in any material
respect, or of the necessity to amend or supplement the Prospectus (as
then amended or supplemented) to comply with the Act or any other law.
If at any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, the Company will make
every reasonable effort to obtain the withdrawal of such order at the
earliest possible time. If the Company elects to rely on Rule 434 under
the Act, the Company will provide the Underwriters with copies of the
form of Rule 434 Prospectus (including copies of a term sheet that
complies with the requirements of Rule 434 under the Act), in such
number as the Underwriters may reasonably request, and file with the
Commission in accordance with Rule 424(b) of the Act the form of
Prospectus complying with Rule 434(b)(2) of the Act before the close of
business on the first business day immediately following the date
hereof. If the Company elects not to rely on Rule 434 under the Act,
the Company will provide the Underwriters with copies of the form of
Prospectus, in such number as the Underwriters may reasonably request,
and file with the Commission such Prospectus in accordance with Rule
424(b) of the Act before the close of business on the second business
day immediately following the date hereof. To the extent applicable,
the copies of the Registration Statement and each amendment thereto
(including all exhibits filed therewith), any Prepricing Prospectus,
Prospectus or any Rule 434 Prospectus (in each case, as amended or
supplemented) furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to Edgar.
(b) The Company will furnish to you, without charge, two
signed duplicate originals of the Registration Statement as originally
filed with the Commission and of each amendment thereto, including
financial statements and all exhibits thereto, and will also furnish to
you, without charge, such number of conformed copies of the
Registration Statement as originally filed and of each amendment
thereto as you may reasonably request. To the extent applicable, the
copies of the Registration Statement and each amendment thereto
(including all exhibits filed therewith), any Prepricing Prospectus,
<PAGE>
-5-
Prospectus, any Rule 434 Prospectus or any Rule 462 Registration
Statement (in each case, as amended or supplemented) furnished to the
Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to Edgar.
(c) The Company will not file any Rule 462 Registration
Statement or any amendment to the Registration Statement or make any
amendment or supplement to the Prospectus unless (A) you shall have
previously been advised thereof and given a reasonable opportunity to
review such filing, amendment or supplement, and (B) you have not
reasonably objected to such filing, amendment or supplement after being
so advised.
(d) Prior to the execution and delivery of this Agreement, the
Company has delivered or will deliver to you, without charge, in such
quantities as you have requested or may hereafter reasonably request,
copies of each form of the Prepricing Prospectus. The Company consents
to the use, in accordance with the provisions of the Act and with the
securities or Blue Sky laws of the jurisdictions in which the Shares
are offered by the several Underwriters and by dealers, prior to the
date of the Prospectus, of each Prepricing Prospectus so furnished by
the Company.
(e) As soon after the execution and delivery of this Agreement
as is practicable and thereafter from time to time for such period as
in the reasonable opinion of counsel for the Underwriters a prospectus
is required by the Act to be delivered in connection with sales by any
Underwriter or dealer, and for so long a period as you may request for
the distribution of the Shares, the Company will deliver to each
Underwriter, without charge, as many copies of the Prospectus (and of
any amendment or supplement thereto) as they may reasonably request.
The Company consents to the use of the Prospectus (and of any amendment
or supplement thereto) in accordance with the provisions of the Act and
with the securities or Blue Sky laws of the jurisdictions in which the
Shares are offered by the several Underwriters and by all dealers to
whom Shares may be sold, both in connection with the offering and sale
of the Shares and for such period of time thereafter as the Prospectus
is required by the Act to be delivered in connection with sales by any
Underwriter or dealer. If at any time prior to the later of (i) the
completion of the distribution of the Shares pursuant to the offering
contemplated by the Registration Statement or (ii) the expiration of
prospectus delivery requirements with respect to the Shares under
Section 4(3) of the Act and Rule 174 thereunder, any event shall occur
that in the judgment of the Company or in the opinion of counsel for
the Underwriters is required to be set forth in the Prospectus (as then
amended or supplemented) or should be set forth therein in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary to
supplement or amend the Prospectus to comply with the Act or any other
law, the Company will forthwith prepare and, subject to Sections 5(a)
and 5(c) hereof, file with the Commission and use its best efforts to
cause to become effective as promptly as possible an appropriate
supplement or amendment thereto, and will furnish to each Underwriter
who has previously requested Prospectuses, without charge, a reasonable
number of copies thereof.
<PAGE>
-6-
(f) The Company will cooperate with you and counsel for the
Underwriters in connection with the registration or qualification of
the Shares for offering and sale by the several Underwriters and by
dealers under the securities or Blue Sky laws of such jurisdictions as
you may reasonably designate and will file such consents to service of
process or other documents as may be reasonably necessary in order to
effect and maintain such registration or qualification for so long as
required to complete the distribution of Shares; provided that in no
event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action
which would subject it to service of process in suits, other than those
arising out of the offering or sale of the Shares, in any jurisdiction
where it is not now so subject. In the event that the qualification of
the Shares in any jurisdiction is suspended, the Company shall so
advise you promptly in writing.
(g) The Company will make generally available to its security
holders a consolidated earnings statement (in form complying with the
Provisions of Rule 158), which need not be audited, covering a
twelve-month period commencing after the effective date of the
Registration Statement and the Rule 462 Registration Statement, if any,
and ending not later than 15 months thereafter, as soon as practicable
after the end of such period, which consolidated earnings statement
shall satisfy the provisions of Section 11(a) of the Act.
(h) During the period ending five years from the date hereof,
the Company will furnish to you and, upon your request, to each of the
other Underwriters, (i) as soon as available, a copy of each proxy
statement, quarterly or annual report or other report of the Company
mailed to stockholders or filed with the Commission, the NASD or the
Nasdaq Stock Market or any securities exchange and (ii) from time to
time such other information concerning the Company as you may
reasonably request. To the extent applicable, the copies of the
Registration Statement and each amendment thereto (including all
exhibits filed therewith), any Prepricing Prospectus, Prospectus, any
Rule 434 Prospectus or any Rule 462 Registration Statement (in each
case, as amended or supplemented) furnished to the Underwriters will be
identical to the electronically transmitted copies thereof filed with
the Commission pursuant to Edgar.
(i) If this Agreement shall terminate or shall be terminated
after execution pursuant to any provision hereof (except pursuant to a
termination under Section 13 hereof) or if this Agreement shall be
terminated by the Underwriters because of any inability, failure or
refusal on the part of the Company or the Selling Stockholders to
perform any agreement herein or to comply with any of the terms or
provisions hereof, the Company agrees to reimburse you and the other
Underwriters for all out-of-pocket expenses (including travel expenses
and fees and expenses of counsel for the Underwriters but excluding
wages and salaries paid by you) reasonably incurred by you in
connection herewith.
<PAGE>
-7-
(j) The Company will apply the net proceeds from the sale of
the Shares to be sold by it hereunder for the purposes set forth under
"Use of Proceeds" in the Prospectus.
(k) If Rule 430A under the Act is employed, the Company will
timely file the Prospectus pursuant to Rule 424(b) under the Act.
(l) For a period of 180 days after the date of the Prospectus
first filed pursuant to Rule 424(b) under the Act, without your prior
written consent, the Company will not, directly or indirectly, issue,
sell, offer or contract to sell or otherwise dispose of or transfer any
shares of Common Stock or securities convertible into or exchangeable
or exercisable for shares of Common Stock (collectively, "Company
Securities") or any rights to purchase Company Securities, except for
issuances of Company Securities (i) to the Underwriters pursuant to
this Agreement, (ii) not exceeding an aggregate of [______] shares
Common Stock (including securities to purchase Common Stock) under the
Company's presently authorized Omnibus Executive Incentive Compensation
Plan, (iii) in accordance with the terms of options or warrants issued
by the Company on or prior to the date hereof and described in the
Registration Statement, (iv) to the owners of dental practices in
connection with the acquisition of the stock or assets of such
practices by the Company or by any professional association that has
entered into a management agreement with the Company relating to any
such dental practice or (v) in connection with the acquisition by the
Company of professional practice management organizations.
(m) Prior to the Closing Date or the Additional Closing Date,
as the case may be, the Company will furnish to you, as promptly as
possible, copies of any unaudited interim financial statements of the
Company for any period subsequent to the periods covered by the
financial statements appearing in the Prospectus.
(n) The Company will comply with all provisions of any
undertakings contained in the Registration Statement.
(o) The Company will not at any time, directly or indirectly,
take any action designed, or which might reasonably be expected to
cause or result in, or which will constitute, stabilization or
manipulation of the price of the shares of Common Stock to facilitate
the sale or resale of any of the Shares.
(p) The Company will use its best efforts to qualify or
register its Common Stock for sale in non-issuer transactions under (or
obtain exemptions from the application of) the Blue Sky laws of each
state where necessary to permit market making transactions and
secondary trading, and will comply with such Blue Sky laws and will
continue such qualifications, registrations and exemptions in effect
for a period of five years after the date hereof.
(q) The Company will timely file within the National
Association of Securities Dealers Automated Quotation National Market
System ("NASDAQ/NMS") all documents and notices required by the
NASDAQ/NMS of companies that have issued
<PAGE>
-8-
securities that are traded in the over-the-counter market and
quotations for which are reported by the NASDAQ/NMS.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Underwriter on the date hereof, and shall be
deemed to represent and warrant to each Underwriter on the Closing Date and the
Additional Closing Date, that:
(a) The Company satisfies all of the requirements of the Act
for use on Form S-1, and for the offering of Shares contemplated
hereby. Each Prepricing Prospectus included as part of the Registration
Statement as originally filed or as part of any amendment or supplement
thereto, or filed pursuant to Rule 424(a) under the Act, complied when
so filed in all material respects with the provisions of the Act,
except that this representation and warranty does not apply to
statements in or omissions from such Prepricing Prospectus (or any
amendment or supplement thereto) made in reliance upon and in
conformity with information relating to any Underwriter furnished to
the Company in writing by or on behalf of any Underwriter through you
expressly for use therein. The Commission has not issued any order
preventing or suspending the use of any Prepricing Prospectus.
(b) The Registration Statement (including any Rule 462
Registration Statement), in the form in which it becomes effective and
also in such form as it may be when any post-effective amendment
thereto shall become effective, and the Prospectus, and any supplement
or amendment thereto when filed with the Commission under Rule 424(b)
under the Act, will comply in all material respects with the provisions
of the Act and will not at any such times 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, except that this representation and warranty does not apply
to statements in or omissions from the Registration Statement or the
Prospectus (or any amendment or supplement thereto) made in reliance
upon and in conformity with information relating to any Underwriter
furnished to the Company in writing by or on behalf of any Underwriter
through you expressly for use therein.
(c) The capitalization of the Company is and will be as set
forth in the Prospectus as of the date set forth therein. All the
outstanding shares of Common Stock of the Company have been, and as of
the Closing Date will be, duly authorized and validly issued, are fully
paid and non-assessable and are free of any preemptive or similar
rights; except as set forth in the Prospectus, the Company is not a
party to or bound by any outstanding options, warrants, or similar
rights to subscribe for, or contractual obligations to issue, sell,
transfer or acquire, any of its capital stock or any securities
convertible into or exchangeable for any of such capital stock; the
Shares to be issued and sold to the Underwriters by the Company
hereunder have been duly authorized and, when issued and delivered to
the Underwriters against payment therefor in accordance with the terms
hereof, will be validly issued, fully paid and non-assessable and free
of any preemptive or similar rights; the capital stock of the Company
conforms to the description thereof in the Registration Statement and
the Prospectus (or any amendment
<PAGE>
-9-
or supplement thereto); and the delivery of certificates for the Shares
against payment therefor pursuant to the terms of this Agreement will
pass valid title, to the Shares, free and clear of any claim,
encumbrance or defect in title, to the several Underwriters purchasing
the Shares in good faith and without notice of any lien, claim or
encumbrance. The certificates for the Shares are in valid and
sufficient form.
(d) The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware with
full power and authority to own, lease and operate its properties and
to conduct its business as presently conducted and as described in the
Registration Statement and the Prospectus (and any amendment or
supplement thereto), and is duly registered and qualified to conduct
its business and is in good standing in each jurisdiction or place
where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the failure
to so register or qualify does not, individually or in the aggregate,
have a material adverse effect on the condition (financial or other),
business, properties, net worth, results of operations or prospects of
the Company and its subsidiaries taken as a whole (a "Material Adverse
Effect").
(e) The Company does not own a material interest in or
control, directly or indirectly, any other corporation, partnership,
joint venture, association, trust or other business organization,
except that prior to the Closing Date the Company shall form Dental
Care Alliance of Florida, Inc. and Dental Care Alliance of Michigan,
Inc., each of which shall be a wholly owned subsidiary of the Company
(collectively, the "Subsidiaries"). On the Closing Date, and on any
Additional Closing Date, each of the Subsidiaries will be a corporation
duly organized validly existing and in good standing under the laws of
the state of its incorporation with full corporate power and authority
to own, lease and operate its properties and to conduct its business as
contemplated by the Registration Statement and the Prospectus (and any
amendment or supplement thereto), and will be duly registered and
qualified to conduct its business and will be in good standing in each
other jurisdiction or place where the nature of its properties or the
conduct of its business requires such registration or qualification,
except where the failure to so register or qualify does not,
individually or in the aggregate, have a Material Adverse Effect. On
the Closing Date, and on any Additional Closing Date, all of the
outstanding shares of capital stock of each of the Subsidiaries will
have been duly authorized and validly issued, fully paid and
nonassessable, and be owned by the Company directly or indirectly
through one of the other Subsidiaries, free and clear of any lien,
adverse claim, security interest, equity or other encumbrance.
(f) There are no legal or governmental proceedings pending or,
to the best knowledge of the Company, threatened, against the Company
or any of the Subsidiaries or to which the Company or any of the
Subsidiaries or to which any of their respective properties, is
subject, nor, to the best knowledge of the Company after reasonably
inquiry, pending or threatened against any of the dental practice
groups with which the Company has management service agreements (each a
"Practice Group") or any individual dentist practicing in any Practice
Group (each a "Dentist") or to which any
<PAGE>
-10-
Practice Group or any Dentist, or to which any of their respective
properties, is subject, in each case that are required to be described
in the Registration Statement or the Prospectus (or any amendment or
supplement thereto) but are not described as required. Except as
described in the Prospectus, there is no action, suit, inquiry,
proceeding, or investigation by or before any court or governmental or
other regulatory or administrative agency or commission pending or, to
the best knowledge of the Company, threatened, against or involving the
Company or any of the Subsidiaries nor, to the best knowledge of the
Company after reasonably inquiry, pending or threatened against any
Practice Group or any Dentist, in each case which might individually or
in the aggregate prevent or adversely affect the transactions
contemplated by this Agreement or result in a material adverse change
in the condition (financial or otherwise), properties, business, net
worth or results of operations or prospects of the Company or any of
its Subsidiaries nor, to the knowledge of the Company, is there any
basis for any such action, suit, inquiry, proceeding, or investigation.
There are no agreements, contracts, indentures, leases or other
instruments that are required to be described in the Registration
Statement or the Prospectus (or any amendment or supplement thereto) or
to be filed as an exhibit to the Registration Statement that are not
described or filed as required by the Act. All such contracts to which
the Company or any Subsidiary is a party have been duly authorized,
executed and delivered by the Company or such Subsidiary, constitute
valid and binding agreements of the Company and are enforceable against
the Company or such Subsidiary in accordance with the terms thereof,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity), and the
Company nor any Subsidiary, nor to the Company's knowledge, any other
party, is in breach of or default under any of such contracts.
(g) Neither the Company nor any of the Subsidiaries is in
violation of its certificate or articles of incorporation or bylaws, or
other organizational documents, nor is the Company or any of the
Subsidiaries in violation of any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or any of the
Subsidiaries or of any decree of any court or governmental agency or
body having jurisdiction over the Company or any of the Subsidiaries,
or in default in any material respect in the performance of any
obligation, agreement or condition contained in (i) any bond,
debenture, note or any other evidence of indebtedness, or (ii) any
material agreement, indenture, lease or other instrument to which the
Company or any of the Subsidiaries is a party or by which any of them
or any of their respective properties may be bound; and there does not
exist any state of facts which constitutes an event of default on the
part of the Company or any of the Subsidiaries as defined in such
documents or which, with notice or lapse of time or both, would
constitute such an event of default.
(h) The execution and delivery of this Agreement and the
performance by the Company of its obligations under this Agreement have
been duly and validly authorized by the Company, and this Agreement has
been duly executed and delivered by the
<PAGE>
-11-
Company and constitutes the valid and legally binding agreement of the
Company, enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, conveyance, reorganization, and
similar laws affecting rights and remedies generally, and subject, as
to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at law or
in equity).
(i) Neither the issuance and sale of the Shares, the
execution, delivery or performance of this Agreement by the Company nor
the consummation by the Company of the transactions contemplated hereby
(i) requires any consent, approval, authorization or other order of or
registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency or official (except such as
may be required for the registration of the Shares under the Act and
compliance with the securities or Blue Sky laws of various
jurisdictions, all of which will be, or have been, effected in
accordance with this Agreement) or conflicts with or will conflict with
or constitutes or will constitute a breach of, or a default under, the
certificate or articles of incorporation or bylaws, or other
organization documents, of the Company or any of the Subsidiaries or
(ii) conflicts or will conflict with or constitutes a breach of, or a
default under, any agreement, indenture, lease or other instrument to
which the Company or any of the Subsidiaries is a party or by which any
of them or any of their respective properties may be bound, or violates
any statute, law, regulation or filing or judgment, injunction, order
or decree applicable to the Company or any of the Subsidiaries or any
of their respective properties, or results in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any of the Subsidiaries pursuant to the terms
of any agreement or instrument to which any of them is a party or by
which any of them may be bound or to which any of the property or
assets of any of them is subject, which conflicts, breaches or defaults
in this clause (ii) would be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect.
(j) Except as described in the Prospectus, the Company does
not have outstanding and at the Closing Date (and the Additional
Closing Date, if applicable) will not have outstanding any options to
purchase or any warrants to subscribe for, or any securities or
obligations convertible into, or any contracts or commitments to issue
or sell, any shares of Common Stock or any such warrants or convertible
securities or obligations. No holder of securities of the Company has
rights to the registration of any securities of the Company because of
the filing of the Registration Statement that have not been satisfied
or heretofore waived in writing.
(k) Price Waterhouse, the certified public accountants who
have certified the financial statements filed as part of the
Registration Statement and the Prospectus (or any amendment or
supplement thereto), are independent public accountants as required by
the Act.
(l) The financial statements, together with related schedules
and notes, included in the Registration Statement and the Prospectus
(and any amendment or
<PAGE>
-12-
supplement thereto) present fairly the consolidated financial position,
results of operations and changes in financial position of the Company
and the Subsidiaries on the basis stated in the Registration Statement
at the respective dates or for the respective periods to which they
apply; such statements and related schedules and notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as
disclosed therein; and the other financial and statistical information
and data set forth in the Registration Statement and Prospectus (and
any amendment or supplement thereto) is accurately presented and
prepared on a basis consistent with such financial statements and the
books and records of the Company. No other financial statements or
schedules are required to be included in the Registration Statement.
(m) Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), subsequent to the
respective dates as of which such information is given in the
Registration Statement and the Prospectus (or any amendment or
supplement thereto), (i) neither the Company nor any Subsidiary has
incurred any liabilities or obligations, indirect, direct or
contingent, or entered into any other transaction in any case other
than in the ordinary course of business or which could, individually or
in the aggregate, have a Material Adverse Effect; (ii) the Company and
its Subsidiaries have not sustained any material loss or interference
with their respective businesses or properties from fire, flood,
windstorm, accident or other calamity, whether or not covered by
insurance; (iii) the Company has not paid or declared any dividends or
other distributions with respect to its capital stock and the Company
and its Subsidiaries are not in default in the payment of principal or
interest on any outstanding debt obligations; (iv) there has not been
any change in the capital stock (other than upon the sale of the Shares
hereunder and upon the exercise of options and warrants described in
the Prospectus) or any material increase or decrease in indebtedness of
the Company, its Subsidiaries and its predecessors (other than in the
ordinary course of business); and (v) there has not been any Material
Adverse Effect, or any development involving or which may reasonably be
expected, individually or in the aggregate, to involve a potential
future Material Adverse Effect.
(n) The Company and each of the Subsidiaries has good and
marketable title to all property (real and personal) described in the
Prospectus as being owned by it, free and clear of all liens, claims,
security interests or other encumbrances except (i) such as are
described in the Prospectus (or any amendment or supplement thereto) or
(ii) such as are not materially burdensome and do not interfere in any
material respect with the use of the property or the conduct of the
business of the Company and the Subsidiaries taken as a whole. The
property (real and personal) held under lease by the Company and the
Subsidiaries is held by it under valid, subsisting and enforceable
leases with only such exceptions as in the aggregate are not materially
burdensome and do not interfere in any material respect with the
conduct of the business of the Company and the Subsidiaries taken as a
whole.
<PAGE>
-13-
(o) The Company has not distributed and will not distribute on
or prior to the Closing Date or the Additional Closing Date, as the
case may be, any offering material in connection with the offering and
sale of the Shares other than the Prepricing Prospectus, the
Prospectus, or other offering material, if any, as permitted by the Act
and the Rules and Regulations.
(p) The Company has not taken, directly or indirectly, any
action which constituted, or any action designed, or which might
reasonably be expected to cause or result in or constitute, under the
Act or otherwise, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares.
(q) The Company is not an "investment company," an "affiliated
person" of, or "promoter" or "principal underwriter" for an investment
company within the meaning of the Investment Company Act of 1940, as
amended.
(r) The Company and each of the Subsidiaries, and, to the
Company's knowledge, each Practice Group and each Dentist, (i) owns or
possesses and is operating in compliance with the terms, provisions and
conditions of all authorizations, approvals, orders, licenses,
registrations, certificates and permits (collectively, "Permits") of
and from all governmental regulatory officials and bodies necessary to
conduct their respective businesses, subject to such qualifications as
are set forth in the Prospectus (or any amendment or supplement
thereto), (ii) has made all necessary filings required under any
federal or state law, rule or regulation and (iii) has obtained all
necessary authorizations, consents and approvals (collectively,
"Approvals") from other persons or governmental agencies in each case
that are necessary to own or lease its properties and assets and to the
conduct of its business, except where the failure to so own or possess,
comply, file or obtain, individually or in the aggregate, would not
have a Material Adverse Effect. Each such Permit is valid and in full
force and effect and there is no proceeding pending or, to the
Company's knowledge, threatened (or any basis therefor) that could
cause any such Permit, filing or Approval that is material to the
conduct of the business of the Company as presently conducted to be
revoked, withdrawn, canceled, suspended or not renewed. Except as
described in the Prospectus, the Company and each of the Subsidiaries,
and, to the Company's knowledge, each Practice Group and each Dentist,
is operating in material compliance with all applicable laws and
regulations relating to health care and franchising, including, without
limitation, those relating to reimbursement by governmental agencies
and the corporate practice of medicine. The Company has not been made
aware of, or been put on notice that, any Dentist or Practice Group is
not practicing in material compliance with all such laws and
regulations.
(s) The Company does not know of any federal or state laws,
rules or regulations, or any legal or governmental proceedings,
relating to franchising or the provision of health care services or
reimbursement therefor in the jurisdictions in which the Company or any
of the Subsidiaries conduct their respective business, and there are no
contracts or documents to which the Company or any of the Subsidiaries
is a party, in each case the failure to comply with which, whether
singly or in the aggregate, would
<PAGE>
-14-
have a Material Adverse Effect, which are not described in the
Registration Statement or the Prospectus.
(t) Neither the Company nor any of the Subsidiaries is
required to obtain or maintain any of the following: (a) certificates
of need or determinations of need issued by any state health planning
agency or state department of health; (b) accreditation or
authorization from the Joint Commission on the Accreditation of Health
Care Organizations or similar quasi-governmental organization; or (c)
registration, authorization or license from any federal or state
agency, insurance carrier or other third party payor in order for the
Practice Groups to receive reimbursement for professional services
provided to the public; except, in each case, for certificates,
determinations, accreditations, authorizations, registrations,
authorizations and licenses which have been obtained and are maintained
and are described in the Prospectus.
(u) The Company and its Subsidiaries are conducting their
respective businesses in compliance with the laws, rules and
regulations applicable thereto, including laws, rules and regulations
relating to franchising, the payment of fees for the referral of
patients, fee-splitting and the corporate practice of medicine. The
provisions of the Company's management agreements and its other
business arrangements with any Practice Group, and the operations of
the Company in accordance with the terms of such management agreements
or arrangements, are in compliance with applicable law and government
regulation, including without limitation laws, rules and regulations
relating to franchising the payment of fees for the referral of
patients, fee-splitting and the corporate practice of medicine.
(v) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or
other governmental body is necessary in connection with the execution
and delivery of this Agreement and the consummation of the transactions
herein contemplated, except such as have been obtained or made.
(w) The Company, its Subsidiaries and its predecessors have
complied and the Company and its Subsidiaries will comply in all
material respects with wage and hour determinations issued by the U.S.
Department of Labor under the Service Contract Act of 1965 and the Fair
Labor Standards Act in paying its employees' salaries, fringe benefits,
and other compensation for the performance of work or other duties in
connection with contracts with the U.S. government. The Company, its
Subsidiaries and its predecessors have complied and the Company and its
Subsidiaries will comply in all material respects with the terms of all
certifications and representations made to the U.S. Government in
connection with the submission of any bid or proposal or any contract.
The Company, its Subsidiaries and its predecessors have complied in all
material respects and the Company and its Subsidiaries will comply in
all material respects with the requirements of the American with
Disabilities Act of 1990, the Family and Medical Leave Act of 1993, the
Employee Retirement Income Security Act, the Civil Rights Act of 1964
(Title VII), as amended, the Age Discrimination in Employment Act and
other applicable federal and state employment and labor laws.
<PAGE>
-15-
(x) The Company and its Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted
only in accordance with management's general or specific
authorizations; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(y) Neither the Company, its Subsidiaries nor its predecessors
have, directly or indirectly, at any time during the past five years
(i) made any unlawful contribution to any candidate for political
office, or failed to disclose fully any contribution in violation of
law, or (ii) made any payment to any federal, state or foreign
governmental official, or other person charged with similar public or
quasi-public duties, other than payments required or permitted by the
laws of the United States or any jurisdiction thereof or applicable
foreign jurisdictions.
(z) The Company and the Subsidiaries have obtained all
required permits, licenses, and other authorizations, if any, which are
required under federal, state, local and foreign statutes, ordinances
and other laws relating to pollution or protection of the environment,
including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, chemicals, or
industrial, hazardous, or toxic materials or wastes into the
environment (including, without limitation, ambient air, surface water,
ground water, land surface, or subsurface strata) or otherwise relating
to the manufacture, processing, distribution use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants,
chemicals, or industrial, hazardous, or toxic materials or wastes, or
any regulation, rule, code, plan, order, decree, judgment, injunction,
notice, or demand letter issued, entered, promulgated, or approved
thereunder ("Environmental Laws"), other than such permits, licenses,
and other authorizations the failure of which to obtain could not,
individually or in the aggregate, have a Material Adverse Effect. The
Company and the Subsidiaries are in material compliance with all terms
and conditions of all required permits, licenses, and authorizations,
and are also in material compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables contained in the Environmental
Laws. There is not pending or, to the best knowledge of the Company,
threatened civil or criminal litigation, notice of violation, or
administrative proceeding relating in any way to the Environmental Laws
(including but not limited to notices, demand letters, or claims under
the Resource Conservation and Recovery Act of 1976, as amended
("RCRA"), the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), the Emergency Planning
and Community Right to Know Act of 1986, as amended ("EPCRA"), the
Clean Air Act, as amended ("CAA"), or the Clean Water Act, as amended
("CWA") and similar federal, foreign, state, or local laws) involving
the Company or the Subsidiaries. There have not
<PAGE>
-16-
been and there are not any past, present, or foreseeable future events,
conditions, circumstances, activities, practices, incidents, actions,
or plans which may interfere with or prevent continued compliance, or
which may give rise to any common law or legal liability, or otherwise
form the basis of any claim, action, demand, suit, proceeding, hearing,
study, or investigation, based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
or handling, or the emission, discharge, release, or threatened release
into the environment, of any pollutant, contaminant, chemical, or
industrial, hazardous, or toxic material or waste, including , without
limitation, any liability arising, or any claim, action, demand, suit,
proceeding, hearing, study, or investigation which may be brought,
under RCRA, CERCLA, EPCRA, CAA, CWA or similar federal, foreign, state
or local laws, which events, conditions, circumstances, activities,
practices, incidents, actions, or plans could, individually or in the
aggregate, have a Material Adverse Effect.
(aa) The Company and the Subsidiaries own and have full right,
title and interest in and to, or have valid licenses to use, each
material trade name, trademark or service mark under which the Company
or any of the Subsidiaries or any licensee conducts its business, and
the Company has created no lien or encumbrance on, or granted any right
or license with respect to, any such trade name, trademark or service
mark except as described in the Prospectus; there is no claim pending
against the Company or any of the Subsidiaries with respect to any
trade name, trademark or service mark and neither the Company nor any
of its Subsidiaries have received notice that any trade name, trademark
or service mark which it or its licensees use or have used in the
conduct of their respective businesses infringes upon or conflicts with
the rights of any third party.
(bb) All offers and sales of the Company's and its
Subsidiaries' capital stock prior to the date hereof were made in
compliance with the Act and all other applicable state and federal laws
or regulations (or in compliance with exemptions available under such
laws and regulations).
(cc) The Shares have been duly authorized for trading on the
NASDAQ/NMS subject to notice of issuance and upon consummation of the
offering contemplated hereby the Company will be in compliance with the
designation and maintenance criteria applicable to NASDAQ/NMS issuers.
(dd) All federal, state and local tax returns required to be
filed by or on behalf of the Company, any of its Subsidiaries or any of
its predecessors with respect to all periods ended prior to the date of
this Agreement have been filed (or are the subject of valid extension)
with the appropriate federal, state and local authorities and all such
tax returns, as filed, are accurate in all material respects. All
federal, state and local taxes (including estimated tax payments)
required to be shown on all such tax returns or claimed to be due from
or with respect to the business of the Company or any of the
Subsidiaries have been paid or reflected as a liability on the
financial statements of the Company and the Subsidiaries for
appropriate periods, except for those taxes or claims
<PAGE>
-17-
therefor which are being contested by the Company in good faith and for
which appropriate reserves are reflected in the Company's financial
statements. All deficiencies asserted as a result of any federal, state
or local tax audits have been paid or finally settled and no issue has
been raised in any such audit which, by application of the same or
similar principles, reasonably could be expected to result in a
proposed deficiency for any other period no so audited. No state of
facts exists or has existed which would constitute grounds for the
assessment of any tax liability with respect to the periods which have
not been audited by appropriate federal, state or local authorities.
There are not outstanding agreements or waivers extending the statutory
period of limitation applicable to any federal, state or local tax
return for any period. On the Closing Date, and Additional Closing
Date, if any, all stock transfer and other taxes which are required to
be paid in connection with the sale of the shares to be sold by the
Company to the Underwriters will have been fully paid by the Company
and all laws imposing such taxes will have been complied with.
(ee) Except as set forth in the Prospectus, there are no
transactions with any director or executive officer of the Company,
with any nominee for election as a director of the Company, with any
beneficial owner of 5% or more of any class of securities of the
Company, with any promoter or affiliate of the Company (as such terms
are defined in Rule 405 promulgated under the Act), or with any member
of the immediate family of any of the foregoing persons, which are
required by the Act and the applicable rules and regulations thereunder
to be disclosed in the Registration Statement.
(ff) Each officer and director of the Company, each Selling
Stockholder and each beneficial owner of Common Stock or securities
entitling the holder to purchase Common Stock (other than persons who
hold options to purchase Common Stock issued under the Company's
Omnibus Executive Incentive Compensation Plan but do not hold any
Common Stock) has agreed in writing that such person will not directly
or indirectly, for a period of 180 days from the date that the
Registration Statement is declared effective by the Commission (the
"Lock-up Period"), offer, sell, contract to sell, grant any option to
purchase, pledge or otherwise dispose of or transfer (collectively, a
"Disposition") any shares of Common Stock or any securities convertible
into or exchangeable for, or any right to purchase of acquire, shares
of Common Stock (collectively, "Securities") now owned or hereafter
acquired directly by such person or with respect to which such person
has or hereafter acquires the power of disposition, otherwise than with
the prior written consent of Raymond James & Associates except (i) for
bona fide gifts affected other than on any securities exchange or in
the over-the-counter market to donees that agree in writing to be bound
by such agreement, (ii) for sales made by Selling Stockholders to the
Underwriters pursuant to this Agreement to cover over-allotments, if
any, (iii) for testamentary dispositions and (iv) as otherwise set
forth in the lock-up letters from Dr. Matzkin and Dr. Corona to the
Company and Raymond James & Associates, each dated September [__],
1997. The foregoing restriction has been expressly agreed to preclude
the holder of the Securities from engaging in any hedging or other
transaction which is designed to or reasonably expected to lead to or
result in a Disposition of Securities during the Lock-up Period, even
if such
<PAGE>
-18-
Securities would be disposed of by someone other than such holder. Such
prohibited hedging or other transactions would include, without
limitation, any short sale (whether or not against the box) or any
purchase, sale or grant of any right (including, without limitation,
any put or call option) with respect to any Securities or with respect
to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant party of its value from
Securities. Furthermore, such person has also agreed and consented to
the entry of stop transfer instructions with the Company's transfer
agent against the transfer of the Securities held by such person except
in compliance with this restriction. The Company has provided to
counsel for the Underwriters a complete and accurate list of all
securityholders of the Company and the Subsidiaries and the number and
type of securities held by each securityholder. The Company has
provided to counsel for the Underwriters true, accurate and complete
copies of all of the agreements pursuant to which its officers,
directors and stockholders have agreed to such or similar restrictions
(the "Lock-up Agreements") presently in effect or effected hereby. The
Company hereby represents and warrants that it will not release any of
its officers, directors or other stockholders from any Lock-up
Agreements currently existing or hereafter effected without the prior
written consent of Raymond James & Associates.
(gg) Neither the Company nor any of its Subsidiaries (i)
conduct business or have affiliates which conduct business in or with
Cuba (ii) plan to commence doing business in or with Cuba after the
effective date of the Registration Statement, (iii) are required by
Florida law to report a material change in information previously
reported to the State of Florida regarding business conducted in or
with Cuba.
7. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. Each of
the Selling Stockholders hereby severally represents and warrants to each
Underwriter on the date hereof (except as otherwise set forth herein), and shall
be deemed to severally represent and warrant to each Underwriter on the
Additional Closing Date, if any, that:
(a) All consents, approvals, authorizations and orders
necessary for the execution and delivery by such Selling Stockholder of
this Agreement, the Power of Attorney (the "Power of Attorney") and the
Custody Agreement (the "Custody Agreement") referred to in the last
paragraph of this Section 7, and for the sale and delivery of the
Shares to be sold by such Selling Stockholder hereunder, have been
obtained; and such Selling Stockholder has full right, power and
authority to enter into this Agreement, the Power of Attorney and the
Custody Agreement, and to sell, assign, transfer and deliver the Shares
to be sold by such Selling Stockholder hereunder.
(b) This Agreement, the Power of Attorney and the Custody
Agreement have been duly authorized, executed and delivered by such
Selling Stockholder and this Agreement, the Power of Attorney and the
Custody Agreement constitute the valid and binding agreements of such
Selling Stockholder enforceable against such Selling Stockholder in
accordance with their respective terms, except as may be limited by
bankruptcy, insolvency, reorganization or other laws of general
application relating to or
<PAGE>
-19-
affecting enforcement of creditors' rights generally or the
availability of equitable remedies, regardless of whether such
enforcement is considered in a proceeding in equity or at law; the
performance of this Agreement, the Power of Attorney and the Custody
Agreement and the consummation of the transactions contemplated herein
and therein will not result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any statute,
indenture, mortgage, deed of trust, voting trust agreement, note
agreement, lease or other agreement or instrument to which such Selling
Stockholder is a party or by which such Selling Stockholder or such
Selling Stockholder's properties are bound, or under any order, rule or
regulation of any court or governmental agency or body applicable to
such Selling Stockholder or the business or property of such Selling
Stockholder.
(c) Such Selling Stockholder has, and immediately prior to the
Additional Closing Date, if any, such Selling Stockholder will have,
good and valid title to the Shares to be sold by such Selling
Stockholder hereunder, free and clear of all liens, encumbrances,
equities, stockholder agreements, voting trusts or claims of any nature
whatsoever, and, upon delivery of such Shares and payment therefor
pursuant hereto, good and valid title to such Shares, free and clear of
all liens, encumbrances, equities, stockholder agreements, voting
trusts or claims of any nature whatsoever (other than these arising by
or through the Underwriters), will pass to the several Underwriters.
(d) Such Selling Stockholder will not, during the Lock-up
Period, effect the Disposition of any Securities now owned or hereafter
acquired by such Selling Stockholder or with respect to which such
Selling Stockholder has or hereafter acquires the power of disposition,
without the prior written consent of Raymond James & Associates. The
foregoing restriction is expressly agreed to preclude the holder of the
Securities from engaging in any hedging or other transaction which is
designed to or reasonably expected to lead to or result in a
Disposition of Securities during the Lock-up Period, even if such
Securities would be disposed of by someone other than the Selling
Stockholder. Such prohibited hedging or other transactions would
include, without limitation, any short sale (whether or not against the
box) or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to any Securities or
with respect to any security (other than a broad-based market basket or
index) that includes, relates to or derives any significant part of its
value from Securities. Such Selling Stockholder also agrees and
consents to the entry of stop transfer instructions with the Company's
transfer agent against the transfer of the securities held by such
Selling Stockholder except in compliance with this restriction.
(e) Such Selling Stockholder has not taken, and will not take,
directly or indirectly, any action designed to or which has constituted
or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares or otherwise.
(f) No consent, approval, authorization or order of, or any
filing or declaration with, any court or governmental agency or body is
required for the consummation by the
<PAGE>
-20-
Selling Stockholder of the transactions on his part contemplated herein
or in the Power of Attorney or the Custody Agreement, except such as
have been obtained under the Act and such as may be required under
state securities or Blue Sky laws or the by-laws and rules of the NASD
in connection with the purchase and distribution by the Underwriters of
the Shares to be sold by the Selling Stockholder.
(g) Such Selling Stockholder has read with the Registration
Statement, the Prepricing Prospectus and the Prospectus and has no
knowledge of any material fact or condition not set forth in the
Registration Statement, the Prepricing Prospectus or the Prospectus
which has adversely affected, or may reasonably be expected to
adversely affect, the business, properties, business prospects,
condition (financial or otherwise) or results of operations of the
Company, and the sale of the Shares proposed to be sold by such Selling
Stockholder is not prompted by any such knowledge.
(h) All information with respect to such Selling Stockholder
contained in the Registration Statement, the Prepricing Prospectus and
the Prospectus (as amended or supplemented, if the Company shall have
filed with the Commission any amendment or supplement thereto) complied
and will comply in all material respects with all applicable provisions
of the Act, contains and will contain all statements required to be
stated therein, and does not and will not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading.
(i) Such Selling Stockholder is not aware (without having
conducted any investigation or inquiry) that any of the representations
and warranties of the Company set forth in Section 6 above is untrue or
inaccurate in any material respect.
(j) Other than as permitted by the Act and the Rules and
Regulations, such Selling Stockholder has not distributed and will not
distribute any Prepricing Prospectus or any other offering material in
connection with the offering and sale of the Shares.
(k) On the Closing Date, and on the Additional Closing Date,
if any, all stock transfer and other taxes (other than income taxes)
which are required to be paid in connection with the sale and transfer
of the Shares to be sold by the Selling Stockholders to the several
Underwriters hereunder will have been fully paid by such Selling
Stockholder and all laws imposing such taxes will have been fully
complied with.
In order to document the Underwriters' compliance with the reporting
and withholding provisions of the Tax Equity and Fiscal Responsibility Act of
1982 with respect to the transactions herein contemplated, the Selling
Stockholders severally agree to deliver to you at least two days prior to the
Closing a properly completed and executed United States Treasury Department Form
W-9 (or other applicable form or statement specified by Treasury Department
regulations in lieu thereof).
<PAGE>
-21-
Each of the Selling Stockholders represents and warrants that
certificates in negotiable form representing all of the Shares to be sold by
such Selling Stockholder hereunder have been placed in custody under a Custody
Agreement, in the form heretofore furnished to you, duly executed and delivered
by such Selling Stockholder to the Company, as custodian (the "custodian"), and
that such Selling Stockholder has duly executed and delivered a Power of
Attorney, in the form heretofore furnished to you, appointing Steven R. Matzkin
and Mitchell Olan as such Selling Stockholder's attorneys-in-fact (the
"Attorneys-in-Fact") with authority to execute and deliver this Agreement on
behalf of such Selling Stockholder, to determine the purchase price to be paid
by the Underwriters to the Selling Stockholders as provided in Section 2 hereof,
to authorize the delivery of the Shares to be sold by such Selling Stockholder
hereunder or otherwise to act on behalf of such Selling Stockholder in
connection with the transactions contemplated by this Agreement and the Custody
Agreement. Each of the Selling Stockholders specifically agrees that the Shares
represented by the certificates held in custody for such Selling Stockholders
under the Custody Agreement are subject to the interest of the Underwriters
hereunder, and that the arrangements made by such Selling Stockholder for such
custody, and the appointment by such Selling Stockholder of the
Attorneys-in-Fact by the Power of Attorney, are to that extent irrevocable. Each
of the Selling Stockholders specifically agrees that the obligations of such
Selling Stockholders hereunder shall not be terminated by operation of law,
whether by the death or incapacity of any individual Selling Stockholder or, in
the case of an estate or trust, by the death or incapacity of any executor or
trustee or the termination of such estate or trust, or in the case of a
partnership or corporation, by the dissolution of such partnership or
corporation, or by the occurrence of any other event. If any individual Selling
Stockholder or any executor or trustee should die or become incapacitated, or if
any such estate or trust shall be terminated, or if any such partnership or
corporation should be dissolved, or if any other such event should occur before
the delivery of the Shares hereunder, certificates representing the Shares shall
be delivered by or on behalf of the Selling Stockholders in accordance with the
terms and conditions of this Agreement and the Custody Agreement, and actions
taken by the Attorneys-in-Fact pursuant to the Powers of Attorney shall be as
valid as if such death, incapacity, termination, dissolution or other event had
not occurred, regardless of whether or not the custodian, the Attorneys-in-Fact,
or any of them, shall have received notice of such death, incapacity,
termination, dissolution or other event.
8. EXPENSES. Whether not the transactions contemplated hereby are
consummated or this Agreement becomes effective or is terminated, the Company
and, unless otherwise paid by the Company, the Selling Stockholders will pay or
cause to be paid (in such proportions as they may agree among themselves) the
following: (i) the fees, disbursements and expenses of the Company's and Selling
Stockholders' counsel and accountants in connection with the registration of the
Shares under the Act and all other expenses in connection with the preparation,
printing and filing of the Registration Statement and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof and of any Prepricing Prospectus to the Underwriters and dealers; (ii)
the printing and delivery (including, without limitation, postage, air freight
charges and charges for counting and packaging) of such copies of the
Registration Statement, the Prospectus, each Prepricing Prospectus, the Blue Sky
memoranda, the Power of Attorney, the Master Agreement Among Underwriters, this
Agreement, the Selected Dealers Agreement and all amendments or supplements to
any of them
<PAGE>
-22-
as may be reasonably requested for use in connection with the offering and sale
of the Shares; (iii) all expenses in connection with the qualification of the
Shares for offering and sale under state securities laws or Blue Sky laws,
including the fees of the counsel for the Underwriters in connection therewith;
(iv) the filing fees incident to securing any required review by the NASD, of
the terms of the sale of the Shares and the reasonable fees and disbursements of
the Underwriters' counsel relating thereto; (v) the cost of preparing stock
certificates; (vi) the costs and charges of any transfer agent or registrar;
(vii) the cost of the tax stamps, if any, in connection with the issuance and
delivery of the Shares to the respective Underwriters; (viii) all other fees,
costs and expenses referred to in Item 13 of the Registration Statement and (ix)
all other costs and expenses incident to the performance of the obligations of
the Company and the Selling Stockholders hereunder which are not otherwise
specifically provided for in this Section. The provisions of this Section 8 are
intended to relieve the Underwriters from the payment of the expenses and costs
which the Selling Stockholders and the Company hereby agree to pay, but shall
not affect any agreement which the Selling Stockholders and the Company may make
or may have made, for the sharing of any of such expenses and costs. Such
agreements shall not impair the obligations of the Company and the Selling
Stockholders hereunder to the several Underwriters. Notwithstanding the
foregoing, in the event that the proposed offering is terminated for the reasons
set forth in Section 5(i) hereof, the Company agrees to reimburse the
Underwriters as provided in Section 5(i).
9. INDEMNIFICATION AND CONTRIBUTION. The Company and the Selling
Stockholders jointly and severally agree to indemnify and hold harmless you and
each other Underwriter, the directors, officers, employees and agents of each
Underwriter, and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Securities Exchange Act of
1934, as amended (the "Exchange Act") from and against any and all losses,
claims, damages, liabilities and expenses (including reasonable costs of
investigation) arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in any Prepricing Prospectus or in
the Registration Statement or the Prospectus or in any amendment or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, except insofar as such losses, claims, damages,
liabilities or expenses arise out of or are based upon an untrue statement or
omission or alleged untrue statement or omission which has been made therein or
omitted therefrom in reliance upon and in conformity with the information
furnished in writing to the Company by or on behalf of any Underwriter through
you expressly for use in connection therewith, or (ii) any inaccuracy in the
representations and warranties of the Company or the Selling Stockholders
contained herein or any failure of the Company or the Selling Stockholders to
perform their respective obligations hereunder or under law; provided, however,
that with respect to any untrue statement or omission made in any Prepricing
Prospectus, the indemnity agreement contained in this subsection shall not inure
to the benefit of any Underwriter (or to the benefit of any person controlling
such Underwriter) from whom the person asserting any such losses, claims,
damages or liabilities purchased the Shares concerned if both (A) a copy of the
Prospectus was not sent or given to such person at or prior to the written
confirmation of the sale of such shares of Stock to such person as required by
the Act, and (B) the untrue statement or omission in the Prepricing Prospectus
was corrected in the
<PAGE>
-23-
Prospectus. Notwithstanding anything in this Section 9, (A) each Selling
Stockholder shall be liable under clause (i) of this paragraph to the extent,
but only to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in reliance upon and conformity with
information furnished to the Company or any Underwriter by such Selling
Stockholder, either directly or through such Selling Stockholder's
representatives, for use in the preparation thereof and (B) in no event shall
any Selling Stockholder's obligation under this Section 9 exceed the total
proceeds received by such Selling Stockholder from the Underwriters in the
offering (it being agreed that the Company shall bear the balance).
In addition to its other obligations under this Section 9, the Company
and the Selling Stockholders agree that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any statement or omission, or any inaccuracy in the
representations and warranties of the Company or the Selling Stockholders herein
or failure to perform its obligations hereunder, all as described in this
Section 9, it will reimburse each Underwriter on a quarterly basis for all
reasonable legal or other expenses incurred in connection with investigating or
defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Company's or the Selling Stockholders' obligation to
reimburse each Underwriter for such expenses and the possibility that such
payments might later be held to have been improper by a court of competent
jurisdiction. To the extent that any such interim reimbursement payment is so
held to have been improper, each Underwriter shall promptly return it to the
Company or the appropriate Selling Stockholders, as the case may be, together
with interest, compounded daily determined on the basis of the base lending rate
announced from time to time by Chase Manhattan Bank, N.A. (the "Prime Rate").
Any such interim reimbursement payments which are not made to the Underwriters
within 30 days of a request for reimbursement shall bear interest at the Prime
Rate from the date of such request.
If any action or claim shall be brought against any Underwriter or any
person controlling any Underwriter in respect of which indemnity may be sought
against the Company or the Selling Stockholders, such Underwriter or such
controlling person shall promptly notify in writing the party(s) against whom
indemnification is being sought (the "indemnifying party" or "indemnifying
parties"), and such indemnifying party(s) shall assume the defense thereof,
including the employment of counsel reasonably acceptable to such Underwriter or
such controlling person and payment of all fees and expenses. Such Underwriter
or any such controlling person shall have the right to employ separate counsel
(but the Company and the Selling Stockholders shall not be liable for the fees
and expenses of more than one counsel) in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Underwriter or such controlling person unless (i) the
indemnifying party(s) has (have) agreed in writing to pay such fees and
expenses, (ii) the indemnifying party(s) has (have) failed to assume the defense
and employ counsel reasonably acceptable to the Underwriter or such controlling
person or (iii) the named parties to any such action (including any impleaded
parties) include both such Underwriter or such controlling person and the
indemnifying party(s), and such Underwriter or such controlling person shall
have been advised by its counsel that one or more legal defenses may be
available to the Underwriter
<PAGE>
-24-
which may not be available to the Company, or that representation of such
indemnified party and any indemnifying party(s) by the same counsel would be
inappropriate under applicable standards of professional conduct (whether or not
such representation by the same counsel has been proposed) due to actual or
potential differing interests between them (in which case the indemnifying
party(s) shall not have the right to assume the defense of such action on behalf
of such Underwriter or such controlling person (notwithstanding its (their)
obligation to bear the fees and expenses of such counsel). The indemnifying
party(s) shall not be liable for any settlement of any such action effected
without its (their) written consent, but if settled with such written consent,
or if there be a final judgment for the plaintiff in any such action, the
indemnifying party(s) agrees to indemnify and hold harmless any Underwriter and
any such controlling person from and against any loss, claim, damage, liability
or expense by reason of such settlement or judgment, but in the case of a
judgment only to the extent stated in the immediately preceding paragraph.
Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement, and any person who controls the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act and the Selling Stockholders, to
the same extent as the foregoing indemnity from the Company and the Selling
Stockholders to each Underwriter, but only with respect to information furnished
in writing by or on behalf of such Underwriter through you expressly for use in
the Registration Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto. If any action or claim shall be brought or
asserted against the Company, any of its directors, any such officers, or any
such controlling person or the Selling Stockholders based on the Registration
Statement, the Prospectus or any Prepricing Prospectus, or any amendment or
supplement thereto, and in respect of which indemnity may be sought against any
Underwriter pursuant to this paragraph, such Underwriter shall have the rights
and duties given to the Company and the Selling Stockholders by the preceding
paragraph (except that if the Company shall have assumed the defense thereof
such Underwriter shall not be required to do so, but may employ separate counsel
therein and participate in the defense thereof, but the fees and expenses of
such counsel shall be at such Underwriter's expense), and the Company, its
directors, any such officers, and any such controlling persons and the Selling
Stockholders shall have the rights and duties given to the Underwriters by the
immediately preceding paragraph.
In addition to its other obligations under this Section 9, each
Underwriter severally agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or omission,
described in this Section 9 which relates to information furnished to the
Company in writing by or on behalf of the Underwriters through you expressly for
use in the Registration Statement, it will reimburse the Company (and, to the
extent applicable, each officer, director, controlling person or Selling
Stockholder) on a quarterly basis for all reasonable legal or other expenses
incurred in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company (and, to the extent
applicable, each officer, director, controlling person or Selling Stockholder)
for such expenses and the possibility that such payments might later be held to
have been improper by a court of competent jurisdiction. To the extent that any
such interim reimbursement payment is so held to have
<PAGE>
-25-
been improper, the Company (and, to the extent applicable, each officer,
director, controlling person or Selling Stockholder) shall promptly return it to
the Underwriters together with interest, compounded daily, determined on the
basis of the Prime Rate. Any such interim reimbursement payments which are not
made to the Company within 30 days of a request for reimbursement shall bear
interest at the Prime Rate from the date of such request.
If the indemnification provided for in this Section 9 is unavailable or
insufficient for any reason whatsoever to an indemnified party under the first
or fourth paragraph hereof with respect to any losses, claims, damages,
liabilities or expenses referred to therein, then an indemnifying party, in lieu
of indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Selling Stockholders on the
one hand and the Underwriters on the other hand from the offering of the Shares
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 and the Selling Stockholders on the one hand and the Underwriters on
the other hand in connection with the statements or omissions that resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and the Selling Stockholders on the one hand and the Underwriters on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company and the Selling
Stockholders bear to the total underwriting discounts and commissions received
by the Underwriters, in each case as set forth in the table on the cover page of
the Prospectus; provided that, in the event that the Underwriters shall have
purchased any Additional Shares hereunder, any determination of the relative
benefits received by the Company and the Selling Stockholders or the
Underwriters from the offering of the Shares shall include the net proceeds
(before deducting expenses) received by the Company and the Selling
Stockholders, and the underwriting discounts and commissions received by the
Underwriters, from the sale of such Additional Shares, in each case computed on
the basis of the respective amounts set forth in the notes to the table on the
cover page of the Prospectus. The relative fault of the Company or the Selling
Stockholders on the one hand and the Underwriters on the other hand shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Selling
Stockholders on the one hand or by the Underwriters on the other hand and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company, the Selling Stockholders and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 9
was determined by a 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 account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities and expenses referred to in
the immediately
<PAGE>
-26-
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, 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 9, no Underwriter shall be
required to contribute any amount in excess of the amount by which the
underwriting discount applicable to the Shares underwritten by it and
distributed to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such 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 Act)
shall be entitled to contribution from any person who was not guilty of any such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to Section 9 are several in proportion to the respective numbers of
Firm Shares set forth opposite their names in Schedule I hereto (or such numbers
of Firm Shares increased as set forth in Section 11 hereof) and not joint.
Notwithstanding the second and fifth paragraphs of this Section 9, any
losses, claims, damages, liabilities or expenses for which an indemnified party
is entitled to indemnification or contribution under this Section 9 shall be
paid by the indemnifying party to the indemnified party as such losses, claims,
damages, liabilities or expenses are incurred. The indemnity, contribution and
reimbursement agreements contained in Section 9 and the representations and
warranties of the Company and the Selling Stockholders, respectively, set forth
in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Underwriter or
any person controlling any Underwriter, the Company, its directors or officers
or any person controlling the Company or the Selling Stockholders, (ii)
acceptance of any Shares and payment therefor hereunder and (iii) any
termination of this Agreement. A successor to any Underwriter or any person
controlling any Underwriter, or to the Company, its directors or officers, or
any person controlling the Company or the Selling Stockholders, shall be
entitled to the benefits of the indemnity, contribution and reimbursement
agreements contained in this Section 9.
It is agreed that any controversy arising out of the operation of the
interim reimbursement arrangements set forth in the second and fifth paragraphs
of this Section 9, including the amounts of any requested reimbursement payments
and the method of determining such amounts, shall be settled by arbitration
conducted under the provisions of the Constitution and Rules of the Board of
Governors of the New York Stock Exchange, Inc. or pursuant to the Code of
Arbitration Procedure of the NASD. Any such arbitration must be commenced by
service of a written demand for arbitration or written notice of intention to
arbitrate, therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to said demand or notice is
authorized to do so. Such an arbitration would be limited to the operation of
the interim reimbursement provisions contained in the second and fifth
paragraphs of this Section 9, and would not resolve the ultimate propriety or
enforceability of the obligations to reimbursement expenses which is created by
the provisions of the second and fifth paragraphs of this Section 9.
10. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations
of the Underwriters to purchase the Firm Shares hereunder are subject to the
following conditions:
<PAGE>
-27-
(a) The Registration Statement shall have become effective not
later than 4:30 p.m., New York City time, on the date hereof, or at
such later date and time as shall be consented to in writing by you,
and all filings required by Rules 424(b), 430A and 462 under the Act
shall have been timely made.
(b) You shall be reasonably satisfied that since the
respective dates as of which information is given in the Registration
Statement and Prospectus, (i) there shall not have been any change in
the capital stock (other than pursuant to the exercise of options and
warrants disclosed in the Prospectus) of the Company or any of its
Subsidiaries or any material change in the indebtedness (other than in
the ordinary course of business) of the Company or any of its
Subsidiaries, (ii) except as set forth or contemplated by the
Registration Statement or the Prospectus, no material, verbal or
written agreement or other transaction shall have been entered into by
the Company, any of the Subsidiaries or any Practice Group, which is
not in the ordinary course of business or which could reasonably be
expected to result in a material reduction in the future earnings of
the Company and its Subsidiaries, (iii) no loss or damage (whether or
not insured) to the property of the Company, any of the Subsidiaries or
any Practice Group shall have been sustained which materially or
adversely affects the condition (financial or otherwise), business,
results of operations or prospects of the Company or any of its
Subsidiaries, (iv) no legal or governmental action, suit or proceeding
affecting the Company , the Subsidiaries or any Practice Group which is
material to the Company or the Subsidiaries or which affects or could
reasonably be expected to affect the transactions contemplated by this
Agreement shall be instituted or threatened, and (v) there shall not
have been any material change in the condition (financial or
otherwise), business, management, results or operations or prospects of
the Company or its Subsidiaries which makes it impractical or
inadvisable in your judgment to proceed with the public offering or
purchase the Shares as contemplated hereby.
(c) You shall have received on the Closing Date (and the
Additional Closing Date, if any) an opinion of Greenberg Traurig
Hoffman Lipoff Rosen & Quentel, P.A., as counsel for the Company, dated
the Closing Date, reasonably satisfactory to you and your counsel, to
the effect that:
(i) The Company is a corporation duly incorporated
and validly existing in good standing under the laws of the
State of Delaware with full corporate power and authority to
own, lease and operate its properties and to conduct its
business as described in the Registration Statement and the
Prospectus (and any amendment or supplement thereto), and is
duly registered and qualified to conduct its business and is
in good standing in each jurisdiction or place where the
nature of its properties or the conduct of its business
requires such registration or qualification, except where the
failure to so register or qualify does not, individually or in
the aggregate, have a Material Adverse Effect.
<PAGE>
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(ii) Each of the Subsidiaries is a corporation duly
organized and validly existing in good standing under the laws
of the jurisdiction of its organization, with full corporate
power and authority to own, lease and operate its properties
and to conduct its business a described in the Registration
Statement and the Prospectus (and any amendment or supplement
thereto); and is duly registered and qualified to conduct its
business and is in good standing in each jurisdiction or place
where the nature of its properties or the conduct of its
business require such registration or qualification, except
where the failure to so register or qualify does not,
individually or in the aggregate, have a Material Adverse
Effect; and all of the outstanding shares of capital stock of
each of the Subsidiaries have been duly authorized and validly
issued, and are fully paid and nonassessable, and are owned by
the Company directly, or indirectly through one of the other
Subsidiaries, free and clear of any perfected security
interest, or to the best knowledge of such counsel after
reasonable inquiry, any other security interest, lien, adverse
claim, equity or other encumbrance.
(iii) The authorized capital stock of the Company
conforms in all respects to the description thereof contained
in the Prospectus under the caption "Description of Capital
Stock."
(iv) All shares of capital stock of the Company
outstanding prior to the issuance of the Shares to be issued
and sold by the Company hereunder, have been duly authorized
and validly issued, are fully paid and nonassessable and are
free of any preemptive or, to the best knowledge of such
counsel after reasonable inquiry, similar rights that entitle
or will entitle any person to acquire any Shares upon the
issuance thereof by the Company.
(v) To the knowledge of such counsel after reasonable
inquiry all offers and sales of the Company's and its
Subsidiaries capital stock were made in compliance with the
registration provisions of the Act and the registration
provisions of all other applicable state and federal laws or
regulations.
(vi) The Shares to be issued and sold to the
Underwriters by the Company and the Selling Stockholders
hereunder have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor in
accordance with the terms hereof, will be validly issued,
fully paid and nonassessable and free of any preemptive or, to
the best knowledge of such counsel after reasonable inquiry,
similar rights that entitle or will entitle any person to
acquire any Shares upon the issuance thereof by the Company.
(vii) The form of certificates for the Shares
conforms in all material respects to the requirements of the
applicable corporate laws of the State of Delaware.
<PAGE>
-29-
(viii) The Registration Statement has become
effective under the Act and, to the best knowledge of such
counsel after reasonable inquiry, no stop order suspending the
effectiveness of the Registration Statement has been issued
and no proceedings for that purpose are pending before or
contemplated by the Commission.
(ix) The Company has all requisite corporate power
and authority to enter into this Agreement and to issue, sell
and deliver the Shares to be sold by it to the Underwriters as
provided herein, and this Agreement has been duly authorized,
executed and delivered by the Company and is a valid, legal
and binding agreement of the Company enforceable against the
Company in accordance with its terms, except as may be limited
by bankruptcy, insolvency, reorganization or other laws of
general application relating to or affecting enforcement of
creditors' rights generally or the availability of equitable
remedies, regardless of whether such enforcement is considered
in a proceeding in equity or at law.
(x) Neither the Company nor any of its Subsidiaries
is in violation of its certificate or articles of
incorporation or bylaws, or other organizational documents.
(xi) Neither the offer, sale or delivery of the
Shares, the execution, delivery or performance of this
Agreement, compliance by the Company with all provisions
hereof nor consummation by the Company of the transactions
contemplated hereby conflicts or will conflict with or
constitutes or will constitute a breach of, or a default
under, the certificate or articles of incorporation or
by-laws, or other organizational documents, of the Company or
any of the Subsidiaries or any agreement, indenture, lease or
other instrument to which the Company or any of the
Subsidiaries is a party or by which any of them or any of
their respective properties is bound that is known to such
counsel after reasonable inquiry or will result in the
creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any of the
Subsidiaries, nor will any such action result in any violation
of any existing law, regulation, ruling (assuming compliance
with all applicable state securities and Blue Sky laws),
judgment, injunction, order or decree known to such counsel
after reasonable inquiry, applicable to the Company, the
Subsidiaries or any of their respective properties.
(xii) No consent, approval, authorization or other
order of, or registration or filing with, any court,
regulatory body, administrative agency or other governmental
body, agency or official is required on the part of the
Company (except such as have been obtained under the Act or
such as may be required under state securities or Blue Sky
laws governing the purchase and distribution of the Shares)
for the valid issuance and sale of the Shares to the
Underwriters under this Agreement.
<PAGE>
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(xiii) The Registration Statement and the Prospectus
and any supplements or amendments thereto (except for the
financial statements and the notes thereto and the schedules
and other financial and statistical data included therein, as
to which such counsel need not express any opinion) comply as
to form in all material respects with the requirements of the
Act.
(xiv) To the knowledge of such counsel after
reasonable inquiry (A) there are no legal or governmental
proceedings pending or threatened against the Company or any
of the Subsidiaries, or to which the Company or any of the
Subsidiaries, or any of their property, is subject, that are
required to be described in the Registration Statement or
Prospectus (or any amendment or supplement thereto) that are
not described as required therein, and (B) there are no
agreements, contracts, indentures, leases or other instruments
that are required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to
the Registration Statement that are not described or filed as
required, as the case may be. Such counsel has not been
informed of any legal or governmental proceedings pending or
threatened against any Practice Group, or to which any
Practice Group or any of its property is subject, that are
required to be described in the Registration Statement or
Prospectus (or any amendment or supplement thereto) that are
not described as required therein.
(xv) To the knowledge of such counsel after
reasonable inquiry, neither the Company nor any of the
Subsidiaries is in violation of any federal, Delaware or
Florida law, ordinance, administrative or governmental rule or
regulation applicable to the Company or any of the
Subsidiaries or of any decree of any court or federal,
Delaware or Florida governmental agency or body having
jurisdiction over the Company or any of the Subsidiaries
except where such violations do not and will not, individually
or in the aggregate, have a Material Adverse Effect.
(xvi) To the knowledge of such counsel after
reasonable inquiry the Company and the Subsidiaries (i) own or
possess and are operating in compliance with the terms,
provisions and conditions of all Permits of and from all
federal, Delaware and Florida governmental regulatory
officials and bodies necessary to conduct their respective
businesses, (ii) have made all necessary filings required
under any federal, Delaware or Florida law, rule or regulation
and (iii) have obtained all necessary Approvals from other
federal, Delaware or Florida persons or governmental agencies
in each case that are necessary to own or lease its properties
and assets and to the conduct of its business, except where
the failure to so own or possess, comply, file or obtain,
individually or in the aggregate, would not have a Material
Adverse Effect. Each such Permit is valid and in full force
and effect and there is no proceeding pending or threatened
(or any basis therefor) that could cause any such Permit,
filing or Approval that is material to the conduct of the
business of the Company and the Subsidiaries taken as a whole
as presently conducted to be revoked, withdrawn, canceled,
suspended or not renewed.
<PAGE>
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(xvii) The property described in the Prospectus as
held under lease by the Company or its Subsidiaries is held
under valid, subsisting and enforceable leases, with only such
exceptions as in the aggregate are not material and do not
interfere in any material respect with the conduct of the
business of the Company and the Subsidiaries taken as a whole.
(xviii) Such counsel has reviewed all agreements,
contracts, indentures, leases or other documents or
instruments referred to in the Registration Statement and the
Prospectus (other than routine contracts entered into by the
Company or any of the Subsidiaries for the purchase of
materials or the sale of products, entered into in the normal
course of business) and such agreements, contracts,
indentures, leases or other documents or instruments are
fairly summarized or disclosed therein, and filed as exhibits
thereto as required, and such counsel does not know, after
reasonable inquiry, of any agreements, contracts, indentures,
leases or other documents or instruments required to be so
summarized or disclosed or filed which have not been so
summarized or disclosed or filed.
(xix) Such counsel has no reason to believe that the
descriptions in the Prospectus of United States, Delaware or
Florida statutes, regulations or legal or governmental
proceedings, insofar as they purport to summarize certain of
the provisions thereof, are other than accurate or fail to
fairly present the information required to be shown.
(xx) The Company is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended.
In rendering such opinion, counsel may rely, to the extent they deem
such reliance proper, upon an opinion or opinions, each dated the Closing Date,
of other counsel as to matters governed by the laws of jurisdictions other than
the United States or the State of Florida or the General Corporation Law of the
State of Delaware provided that (1) each such local counsel is acceptable to you
and your counsel, (2) counsel shall state in their opinion that they believe
that they and you are justified in relying thereon, and (3) such reliance is
expressly authorized by each opinion so relied upon and a copy of each such
opinion is delivered to you and is in form and substance satisfactory to you. In
rendering such opinion, counsel may rely, to the extent they deem such reliance
proper, as to matters of fact upon certificates of officers of the Company and
of governmental officials. Copies of all such certificates shall be furnished to
you and your counsel on the Closing Date. In addition, such opinion may be
subject to such assumptions as are reasonable and customary in opinions of this
kind.
In rendering such opinion, in each case where such opinion is qualified
by "the best knowledge of such counsel after reasonable inquiry" or "known to
such counsel after reasonable inquiry," such counsel may rely as to matters of
fact upon certificates of executive and other
<PAGE>
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officers and employees of the Company as you and such counsel shall deem are
appropriate and such other procedures as you and such counsel shall mutually
agree; provided, however, in each such case, such counsel shall state that is
has no knowledge contrary to the information contained in such certificates or
developed by such procedures and knows of no reason why you should not
reasonably rely upon the information contained in such certificates or developed
by such procedures. Such counsel may state that their knowledge is limited to
the knowledge of shareholders, attorneys and other employees of such counsel's
firm that have given attention to matters involving the Company.
In addition to the opinion set forth above, such counsel shall
state that during the course of their participation in the preparation of the
Registration Statement and the Prospectus and the amendments thereto, nothing as
come to the attention of such counsel which has caused it to believe that the
Registration Statement and the Prospectus or any amendment thereto (except for
the financial statements and other financial and statistical information
contained therein or omitted therefrom as to which no opinion need be
expressed), at the date thereof, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the Registration
Statement and the Prospectus as of the date of the opinion (except as
aforesaid), contains an untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) You shall have received on the Closing Date (and the
Additional Closing Date, if any) the opinion of Greenberg Traurig
Hoffman Lipoff Rosen & Quentel, P.A., as counsel for the Selling
Stockholders, dated the Closing Date (and the Additional Closing Date,
if any) in form and substance satisfactory to you, to the effect that:
(i) This Agreement, the Power of Attorney and the
Custody Agreement have been duly authorized, executed and
delivered by or on behalf of each Selling Stockholder and
constitute valid and binding agreements of such Selling
Stockholder enforceable in accordance with their respective
terms, except as may be limited by bankruptcy, insolvency,
reorganization or other laws of general application relating
to or affecting enforcement of creditors' rights generally or
the availability of equitable remedies, regardless of whether
such enforcement is considered in a proceeding in equity or at
law; and the performance of this Agreement, the Power of
Attorney and the Custody Agreement and the consummation of the
transactions herein and therein contemplated will not result
in a breach or violation of any of the terms or provisions of,
or constitute a default under, any statute, indenture,
mortgage, deed of trust, voting trust agreement, note
agreement, lease or other agreement or instrument of which
such counsel is aware and to which such Selling Stockholder is
a party or by which such Selling Stockholder or its properties
are bound, or any order, rule or regulation, known to such
counsel of any court or governmental agency or body applicable
to such Selling Stockholders or the business or property of
such Selling Stockholders.
<PAGE>
-33-
(ii) No consent, approval, authorization or order of,
or registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency or
official, has been or is required, and to the best knowledge
of such counsel after reasonable inquiry no other consent,
approval, authorization has been or is required, in each case
for the consummation of the transactions contemplated by this
Agreement, the Power of Attorney and the Custody Agreement in
connection with the Shares to be sold by each of the Selling
Stockholders hereunder, except consents, approvals,
authorizations or orders which have been duly obtained and are
in full force and effect, such as have been obtained under the
Act and such as may be required under state securities or Blue
Sky laws in connection with the purchase and distribution of
such Shares by the Underwriters.
(iii) To the best knowledge of such counsel after
reasonable inquiry, immediately prior to the Additional
Closing each Selling Stockholder has good and valid title to
the Shares to be sold by such Selling Stockholder under this
Agreement, free and clear of all liens, encumbrances, equities
or claims, and full right, power and authority to sell,
assign, transfer and deliver the Shares to be sold by such
Selling Stockholder hereunder.
(iv) The delivery by or on behalf of the Selling
Stockholders to the several Underwriters of certificates for
the Shares being sold by the Selling Stockholders pursuant to
this Agreement against payment therefor as provided herein
will convey good and valid title to such Shares to the several
Underwriters, free and clear of all security interests,
pledges, liens, encumbrances, equitable interests and adverse
claims. The Company is not an "adverse person," and has no
"adverse claim" with respect to the sale of Shares by the
Selling Stockholders for purposes of Section 678.302(2) of the
Florida Statutes. For purposes of such opinion, such counsel
shall be entitled to assume that (a) the several Underwriters
are without notice of any "adverse claim" as such term is
defined in Section 678.302(2) of the Florida Statues (except
that no such assumption may be made by such counsel with
respect to the Company), (b) the several Underwriters are
purchasers for value in good faith for purposes of Section
678.302 of the Florida Statutes and (c) the rights of the
several Underwriters are not limited by the provisions of
Section 678.302(4) of the Florida Statutes.
In rendering such opinion, such counsel may rely upon a certificate of
the Selling Stockholders as to matters of fact (i) with respect to ownership of
and liens, encumbrances, equities or claims on the Shares sold by the Selling
Stockholders, and (ii) with respect to any agreements, mortgages, deeds of
trust, voting trusts, notes, leases or other instruments provided that such
counsel shall state that they believe that both you and they are justified in
relying upon such certificates.
(e) You shall have received on the Closing Date (and the
Additional Closing Date, if any) the opinion of Greenberg Traurig
Hoffman Lipoff Rosen & Quentel, P.A.,
<PAGE>
-34-
as special counsel for the Company for health care regulatory matters,
dated the Closing Date (and the Additional Closing Date, if any) in
form and substance satisfactory to you, to the effect that:
(i) The statements under the captions "Risk Factors
-- Governmental Regulation" and "-- Risks of Becoming Subject
to Licensure" and "Business -- Governmental Regulation" in the
Prospectus, insofar as such statements constitute a summary of
documents referred to therein or matters of Federal or Florida
law, are accurate summaries in all material respects and
fairly and correctly present the information called for with
respect to such documents and matters.
(ii) Such counsel does not know, after reasonable
inquiry, of any federal or Florida laws, rules or regulations,
or any federal or Florida legal or governmental proceedings,
relating to the provision of health care services or
reimbursement therefor in the jurisdictions in which the
Company or any of the Subsidiaries conduct their respective
businesses, or any contracts or documents to which the Company
or any of the Subsidiaries is a party, the failure to comply
with which could reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect, which are
not described in the Registration Statement or the Prospectus.
(iii) On the date of such opinion, neither the
Company nor any of the Subsidiaries are required to obtain or
maintain any of the following: (a) certificates of need or
determinations of need issued by any Florida state health
planning agency or Florida state department of health; (b)
accreditation or authorization from the Joint Commission on
the Accreditation of Health Care Organizations or similar
quasi-governmental organization; or (c) registration,
authorization or license from any federal or Florida agency,
insurance carrier or other third party payor in order for the
Practice Groups to receive reimbursement for professional
services provided to the public.
(iv) Such counsel has no reason to believe that the
Company, any of the Subsidiaries, or any Practice Group is not
conducting its respective businesses in material compliance
with the laws, rules and regulations applicable thereto,
including laws, rules and regulations relating to the payment
of fees for the referral of patients, fee-splitting and the
corporate practice of medicine. The provisions of the
Company's or any of the Subsidiaries' management agreements
and the other business arrangements described in the
Prospectus and the operations of the Company or any of the
Subsidiaries in accordance with the terms of such management
agreements or arrangements are in material compliance with
applicable law and government regulation, including without
limitation laws, rules and regulations relating to the payment
of fees for the referral of patients, fee-splitting and the
corporate practice of medicine.
<PAGE>
-35-
(v) To the best knowledge of such counsel after
reasonable inquiry each Practice Group and each Dentist
practicing therein (i) owns or possesses and is operating in
compliance with the terms, provisions and conditions of all
Permits of and from all federal, Delaware and Florida
governmental regulatory officials and bodies necessary to
conduct their respective businesses, (ii) has made all
necessary filings required under any federal, Delaware or
Florida law, rule or regulation and (iii) has obtained all
necessary Approvals from other federal, Delaware or Florida
persons or governmental agencies in each case that are
necessary to own or lease its properties and assets and to the
conduct of its business, except where the failure to so own or
possess, comply, file or obtain, individually or in the
aggregate, would not have a Material Adverse Effect. Each such
Permit is valid and in full force and effect and there is no
proceeding pending or threatened (or any basis therefor) that
could cause any such Permit, filing or Approval that is
material to the conduct of the business of the Company and the
Subsidiaries taken as a whole as presently conducted to be
revoked, withdrawn, canceled, suspended or not renewed.
(vi) No approval, consent, order, authorization,
designation, declaration or filing by or with any Federal or
Florida regulatory, administrative or other governmental body
is necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions herein
contemplated, except such as have been obtained or made,
specifying the same.
In rendering such opinion such counsel may state that they express no
opinion regarding the applicability of any laws other than federal and Florida
laws and regulation relating to health care or relating to reimbursement for
health care services, to the businesses of the Company and the Subsidiaries
taken as a whole. In addition, in each case where such opinion is qualified by
"the best knowledge of such counsel after reasonable inquiry" or "know, after
reasonable inquiry," such counsel may rely as to matters of fact upon
certificates of executive and other officers and employees of the Company as you
and such counsel shall deem are appropriate and such other procedures as you and
such counsel shall mutually agree; provided, however, in each such case, such
counsel shall state that is has no knowledge contrary to the information
contained in such certificates or developed by such procedures and knows of no
reason why you should not reasonably rely upon the information contained in such
certificates or developed by such procedures. Such counsel may state that their
knowledge is limited to the knowledge of shareholders, attorneys and other
employees of such counsel's firm that have given attention to matters involving
the Company. Such opinion may be subject to such assumptions as are reasonable
and customary in opinions of this kind.
(f) You shall have received on the Closing Date (and the
Additional Closing Date, if any) the opinion of Frimet & Rogalski,
P.C., as special counsel for the Company for health care regulatory
matters, dated the Closing Date (and the Additional Closing Date, if
any) in form and substance satisfactory to you, to the effect that:
<PAGE>
-36-
(i) The statements under the captions "Risk Factors
-- Governmental Regulation" and "-- Risks of Becoming Subject
to Licensure" and "Business -- Governmental Regulation" in the
Prospectus, insofar as such statements constitute a summary of
documents referred to therein or matters of [federal or]
Michigan law, are accurate summaries in all material respects
and fairly and correctly present the information called for
with respect to such documents and matters.
(ii) Such counsel does not know, after reasonable
inquiry, of any [federal or] Michigan laws, rules or
regulations, or any [federal or] Michigan legal or
governmental proceedings, relating to the provision of health
care services or reimbursement therefor in the jurisdictions
in which the Company or any of the Subsidiaries conduct their
respective businesses, or any contracts or documents to which
the Company or any of the Subsidiaries is a party, the failure
to comply with which could reasonably be expected,
individually or in the aggregate, to have a Material Adverse
Effect, which are not described in the Registration Statement
or the Prospectus.
(iii) On the date of such opinion, neither the
Company nor any of the Subsidiaries are required to obtain or
maintain any of the following: (a) certificates of need or
determinations of need issued by any Michigan state health
planning agency or Michigan state department of health; (b)
accreditation or authorization from the Joint Commission on
the Accreditation of Health Care Organizations or similar
quasi-governmental organization; or (c) registration,
authorization or license from any [federal or] Michigan
agency, insurance carrier or other third party payor in order
for the Practice Groups to receive reimbursement for
professional services provided to the public.
(iv) Such counsel has no reason to believe that the
Company, any of the Subsidiaries, or any Practice Group is not
conducting its respective businesses in material compliance
with the laws, rules and regulations applicable thereto,
including laws, rules and regulations relating to the payment
of fees for the referral of patients, fee-splitting and the
corporate practice of medicine. The provisions of the
Company's or any of the Subsidiaries' management agreements
and the other business arrangements described in the
Prospectus and the operations of the Company or any of the
Subsidiaries in accordance with the terms of such management
agreements or arrangements are in material compliance with
applicable law and government regulation, including without
limitation laws, rules and regulations relating to the payment
of fees for the referral of patients, fee-splitting and the
corporate practice of medicine.
(v) To the best knowledge of such counsel after
reasonable inquiry each [Michigan] Practice Group and each
Dentist practicing therein (i) owns or possesses and is
operating in compliance with the terms, provisions and
conditions of all Permits of and from all [federal and]
Michigan governmental regulatory officials and bodies
necessary to conduct its business, (ii) has made all
<PAGE>
-37-
necessary filings required under any [federal or] Michigan
law, rule or regulation and (iii) has obtained all necessary
Approvals from other [federal or] Michigan persons or
governmental agencies in each case that are necessary to own
or lease its properties and assets and to the conduct of its
business, except where the failure to so own or possess,
comply, file or obtain, individually or in the aggregate,
would not have a material adverse effect on the Company and
its Subsidiaries taken as a whole. Each such Permit is valid
and in full force and effect and there is no proceeding
pending or threatened (or any basis therefor) that could cause
any such Permit, filing or Approval that is material to the
conduct of the business of the Company as presently conducted
to be revoked, withdrawn, canceled, suspended or not renewed.
(vi) No approval, consent, order, authorization,
designation, declaration or filing by or with any [Federal or]
Michigan regulatory, administrative or other governmental body
is necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions herein
contemplated, except such as have been obtained or made,
specifying the same.
(vii) To the knowledge of such counsel after
reasonable inquiry there are no legal or governmental
proceedings pending or threatened against the Company or any
of the Subsidiaries, or to which the Company or any of the
Subsidiaries, or any of their property, is subject, that are
required to be described in the Registration Statement or
Prospectus (or any amendment or supplement thereto) that are
not described as required therein. Such counsel has not been
informed of any legal or governmental proceedings pending or
threatened against any Practice Group, or to which any
Practice Group or any of its property is subject, that are
required to be described in the Registration Statement or
Prospectus (or any amendment or supplement thereto) that are
not described as required therein.
(viii) To the knowledge of such counsel after
reasonable inquiry, neither the Company nor any Subsidiary is
in violation of any [federal or] Michigan law, ordinance,
administrative or governmental rule or regulation applicable
to the Company or any of the Subsidiaries or of any decree of
any court or [federal or] Michigan governmental agency or body
having jurisdiction over the Company or any subsidiary except
where such violations do not and will not, individually or in
the aggregate, have a Material Adverse Effect.
In rendering such opinion such counsel may state that they express no
opinion regarding the applicability of any laws other than federal and Michigan
laws and regulation relating to health care or relating to reimbursement for
health care services, to the businesses of the Company and the Subsidiaries
taken as a whole. In addition, in each case where such opinion is qualified by
"the best knowledge of such counsel after reasonable inquiry" or "know, after
reasonable inquiry," such counsel may rely as to matters of fact upon
certificates of executive and other officers and employees of the Company as you
and such counsel shall deem are
<PAGE>
-38-
appropriate and such other procedures as you and such counsel shall mutually
agree; provided, however, in each such case, such counsel shall state that is
has no knowledge contrary to the information contained in such certificates or
developed by such procedures and knows of no reason why you should not
reasonably rely upon the information contained in such certificates or developed
by such procedures. Such counsel may state that their knowledge is limited to
the knowledge of shareholders, attorneys and other employees of such counsel's
firm that have given attention to matters involving the Company. Such opinion
may be subject to such assumptions as are reasonable and customary in opinions
of this kind.
(g) You shall have received on the Closing Date (and the
Additional Closing Date, if any) an opinion of Testa, Hurwitz &
Thibeault, LLP, as counsel for the Underwriters, dated the Closing Date
(and the Additional Closing Date, if any) with respect to the issuance
and sale of the Firm Shares, the Registration Statement and other
related matters as you may reasonably request and the Company and its
counsel shall have furnished to your counsel such documents as they may
reasonably request for the purpose of enabling them to pass upon such
matters.
(h) You shall have received letters addressed to you and dated
the date hereof and the Closing Date from Price Waterhouse, independent
certified public accountants, substantially in the forms heretofore
approved by you.
(i)(i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for
that purpose shall be pending or, to the knowledge of the Company,
shall be threatened or contemplated by the Commission at or prior to
the Closing Date; (ii) no order suspending the effectiveness of the
Registration Statement or the qualification or registration of the
Shares under the securities or Blue Sky laws of any jurisdiction shall
be in effect and no proceeding for such purpose shall be pending or, to
the knowledge of the Company, threatened or contemplated by the
Commission or the authorities of any jurisdiction; (iii) any request
for additional information on the part of the staff of the Commission
or any such authorities shall have been complied with to the
satisfaction of the staff of the Commission or such authorities; (iv)
after the date hereof no amendment or supplement to the Registration
Statement or the Prospectus shall have been filed unless a copy thereof
was first submitted to you and you did not object thereto in good
faith; and (v) all of the representations and warranties of the Company
contained in this Agreement shall be true and correct in all respects
on and as of the date hereof and on and as of the Closing Date as if
made on and as of the Closing Date, and you shall have received a
certificate, dated the Closing Date and signed by the chief executive
officer and the chief financial officer of the Company (or such other
officers as are acceptable to you) to the effect set forth in this
Section 10(i) and in Sections 10(b) and 10(j) hereof.
(j) The Company shall not have failed in any respect at or
prior to the Closing Date to have performed or complied with any of its
agreements herein contained and required to be performed or complied
with by it hereunder at or prior to the Closing Date.
<PAGE>
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(k) You shall have received a certificate, dated on and as of
the Closing Date, by or on behalf of the Selling Stockholders to the
effect that as of such Closing Date such Selling Stockholders',
representations and warranties in this Agreement are true and correct
as if made on and as of such Closing Date, and that such Selling
Stockholders have performed all of their obligations and satisfied all
the conditions on such Selling Stockholders' part to be performed or
satisfied at or prior to the Closing Date.
(l) The Company and the Selling Stockholders shall have
furnished or caused to have been furnished to you such further
certificates and documents as you shall have reasonably requested.
(m) At or prior to the Closing Date, you shall have received
the written commitment of each of the Company's officers and directors
and each beneficial owner of Common Stock or securities entitling the
holder to purchase Common Stock not to, during the Lock-up Period,
directly or indirectly effect a Disposition of any shares of Common
Stock or any Securities now owned or hereafter acquired directly by
such person or with respect to which such person has or hereafter
acquires the power of disposition, otherwise than with the prior
written consent of Raymond James.
(n) At or prior to the effective date of the Registration
Statement, you shall have received a letter from the Corporate
Financing Department of the NASD confirming that such Department has
determined to raise no objections with respect to the fairness or
reasonableness of the underwriting terms and arrangements of the
offering contemplated hereby.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to you and your counsel.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the satisfaction on and as of the Additional
Closing Date of the conditions set forth in this Section 10, except that, if the
Additional Closing Date is other than the Closing Date, the certificates,
opinions and letters referred to in paragraphs (c) through (l) shall be dated as
of the Additional Closing Date and the opinions called for by paragraphs (c) and
(d) shall be revised to reflect the sale of Additional Shares.
If any of the conditions hereinabove provided for in this Section 10
shall not have been satisfied when and as required by this Agreement, this
Agreement may be terminated by you by notifying the Company of such termination
in writing or by telegram at or prior to such Closing Date, but you shall be
entitled to waive any of such conditions.
11. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become effective
upon the later of (a) the execution and delivery hereof by the parties hereto,
and (b) release of notification of the effectiveness of the Registration
Statement by the Commission; provided, however, that the provisions of Sections
8 and 9 shall at all times be effective.
<PAGE>
-40-
If any one or more of the Underwriters shall fail or refuse to purchase
Firm Shares which it or they have agreed to purchase hereunder, and the
aggregate number of Firm Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than one-tenth
of the aggregate number of the Firm Shares, each non-defaulting Underwriter
shall be obligated, severally, in the proportion which the number of Firm Shares
set forth opposite its name in Schedule I hereto bears to the aggregate number
of Firm Shares set forth opposite the names of all non-defaulting Underwriters
or in such other proportion as you may specify in the Agreement Among
Underwriters, to purchase the Firm Shares which such defaulting Underwriter or
Underwriters agreed, but failed or refused to purchase. If any Underwriter or
Underwriters shall fail or refuse to purchase Firm Shares and the aggregate
number of Firm Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Firm Shares and arrangements satisfactory
to you, the Company and the Selling Stockholders for the purchase of such Firm
Shares are not made within 48 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter, the
Company or the Selling Stockholders. In any such case which does not result in
termination of this Agreement, either you or the Company and the Selling
Stockholders shall have the right to postpone the Closing Date, but in no event
for longer than seven (7) days, in order that the required changes, if any, in
the Registration statement and the Prospectus or any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any such default
of any such Underwriter under this Agreement.
12. DEFAULT BY SELLING STOCKHOLDER. If on the Closing Date any Selling
Stockholder fails to sell the Firm Shares which such Selling Stockholder has
agreed to sell on such date as set forth in SCHEDULE II hereto, the Company
agrees that it will sell or arrange for the sale of that number of shares of
Common Stock to the Underwriters which represents Firm Shares which such Selling
Stockholder has failed to so sell, as set forth in SCHEDULE II hereto, or such
lesser number as may be requested by the Representatives.
13. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company or the Selling Stockholders by notice to the Company
and the Selling Stockholders, if prior to the Closing Date or the Additional
Closing Date (if different from the Closing Date and then only as to the
Additional Shares), as the case may be, in your sole judgment, (i) trading in
the Company's Common Stock shall have been suspended by the Commission or the
NASDAQ/NMS (ii) trading in securities generally on the New York Stock Exchange,
American Stock Exchange or NASDAQ/NMS shall have been suspended or materially
limited, or minimum or maximum prices shall have been generally established on
such exchange, or additional material governmental restrictions, not in force on
the date of this Agreement, shall have been imposed upon trading in securities
generally by any such exchange or by order of the Commission or any court or
other governmental authority, (iii) a general moratorium on commercial banking
activities shall have been declared by either federal or New York State
authorities or (iv) there shall have occurred any outbreak or escalation of
hostilities or other international or domestic calamity, crisis or change in
political, financial or economic conditions
<PAGE>
-41-
or other material event the effect of which on the financial markets of the
United States is such as to make it, in your judgment, impracticable or
inadvisable to market the Shares or to enforce contracts for the sale of Shares.
Notice of such cancellation shall be promptly given to the Company and its
counsel by telegraph, telecopy or telephone and shall be subsequently confirmed
by letter.
14. INFORMATION FURNISHED BY THE UNDERWRITERS. The Company acknowledges
that the statements set forth under footnote (3) on the cover page of the
Prospectus and in the third and seventh paragraphs under the caption
"Underwriting" in any Prepricing Prospectus and in the Prospectus, constitute
the only information furnished by or on behalf of the Underwriters through you
or on your behalf as such information is referred to in Sections 6(a), 6(b) and
9 hereof.
15. MISCELLANEOUS. Except as otherwise provided in Sections 5 and 13
hereof, notice given pursuant to any of the provisions of this Agreement shall
be in writing and shall be delivered (i) if to the Company or Selling
Stockholders, to the office of the Company at Dental Care Alliance, 1343 Main
Street, 7th Floor, Sarasota, FL 34236, Attention: Steven R. Matzkin (with copy
to Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A., 1221 Brickell Avenue,
Miami, FL 33131, Attn.: Robert L. Grossman) or (ii) if to you, as
Representatives of the Underwriters, to Raymond James & Associates, Inc., 880
Carillon Parkway, St. Petersburg, Florida 33716, Attention: Frank E. Hancock;
(with copy to Testa, Hurwitz & Thibeault, LLP, Attn.: Leslie E. Davis).
This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company, its directors and officers, and the other
controlling persons referred to in Section 9 hereof, the Selling Stockholders
and their respective successors and assigns, to the extent provided herein, and
no other person shall acquire or have any right under or by virtue of this
Agreement. Neither of the terms "successor" and "successors and assigns" as used
in this Agreement shall include a purchaser from you of any of the Shares in his
status as such purchaser.
16. APPLICABLE LAWS; COUNTERPARTS. This Agreement shall be governed by
and construed in accordance with the laws of the State of Florida without
reference to choice of law principles thereunder.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument. This Agreement shall be effective
when, but only when, at least one counterpart hereof shall have been executed on
behalf of each party hereto.
<PAGE>
-42-
THE COMPANY, THE SELLING STOCKHOLDERS AND THE UNDERWRITERS EACH HEREBY
IRREVOCABLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY
CLAIM BASED UPON OR ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Selling Stockholders and the several Underwriters.
Very truly yours,
DENTAL CARE ALLIANCE, INC.
---------------------------
By:
----------------------------
Name:
----------------------------
Title:
-----------------------------
SELLING STOCKHOLDERS
By:
----------------------------
Name:
----------------------------
Title: Attorney-in-Fact
As Attorney-in-Fact acting on behalf of
each of the Selling Stockholders named
in Schedule II to this Agreement
CONFIRMED as of the date first above
mentioned, on behalf of itself and the other
several Underwriters named in Schedule I hereto.
RAYMOND JAMES & ASSOCIATES, INC.
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
<PAGE>
-43-
SCHEDULE I
NAME NUMBER OF FIRM SHARES
---- ---------------------
Raymond James & Associates, Inc........................
William Blair & Company, L.L.C.........................
TOTAL.................................................. _________
<PAGE>
-44-
SCHEDULE II
FIRM SHARES ADDITIONAL SHARES TOTAL
----------- ----------------- ------
Company _____ _____ _____
- -------
[Selling Stockholders] _____ _____ _____
- ----------------------
TOTAL _____ _____ _____
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
DENTAL CARE ALLIANCE, INC.
(ORIGINALLY INCORPORATED ON ___________, 199_)
ARTICLE I
The name of the corporation is DENTAL CARE ALLIANCE, INC. (hereinafter
called the "Company").
ARTICLE II
The address of the Company's registered office in the State of Delaware
is 1209 Orange Street, City of Wilmington, County of New Castle and the name of
its registered agent at such address is The Corporation Trust Company.
ARTICLE III
The purpose for which the Company is formed is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
ARTICLE IV
This Amended and Restated Certificate of Incorporation shall be
effective at ____ a.m. on ____________, 1997.
ARTICLE V
The aggregate number of shares of all classes of capital stock which
this Company shall have authority to issue is 55,000,000, consisting of (i)
50,000,000 shares of common stock, par value $0.01 per share (the "Common
Stock"), and (ii) 5,000,000 shares of preferred stock, par value $0.01 per share
(the "Preferred Stock").
The designations and the preferences, limitations and relative rights
of the Preferred Stock and the Common Stock of the Company are as follows:
<PAGE>
A. PROVISIONS RELATING TO THE PREFERRED STOCK.
1. The Preferred Stock may be issued from time to time in
one or more classes or series, the shares of each class or series to
have such designations and powers, preferences and rights, and
qualifications, limitations and restrictions thereof as are stated and
expressed herein and in the resolution or resolutions providing for the
issue of such class or series adopted by the Board of Directors (the
"Board") as hereinafter prescribed.
2. Authority is hereby expressly granted to and vested in
the Board to authorize the issuance of the Preferred Stock from time to
time in one or more classes or series, to determine and take necessary
proceedings fully to effect the issuance and redemption of any such
Preferred Stock, and, with respect to each class or series of the
Preferred Stock, to fix and state by the resolution or resolutions from
time to time adopted providing for the issuance thereof the following:
(a) whether or not the class or series is to have
voting rights, full or limited, or is to be without voting
rights;
(b) the number of shares to constitute the class or
series and the designations thereof;
(c) the preferences and relative, participating,
optional or other special rights, if any, and the
qualifications, limitations or restrictions thereof, if any,
with respect to any class or series;
(d) whether or not the shares of any class or series
shall be redeemable and if redeemable the redemption price or
prices, and the time or times at which and the terms and
conditions upon which such shares shall be redeemable and the
manner of redemption;
(e) whether or not the shares of a class or series
shall be subject to the operation of retirement or sinking
funds to be applied to the purchase or redemption of such
shares for retirement, and if such retirement or sinking fund
or funds be established, the annual amount thereof and the
terms and provisions relative to the operation thereof;
(f) the dividend rate, whether dividends are payable
in cash, stock of the Company, or other property, the
conditions upon which and the times when such dividends are
payable, the preference to or the relation to the payment of
the dividends payable on any other class or classes or series
of stock, whether or not such dividend shall be cumulative or
noncumulative, and if cumulative, the date or dates from which
such dividends shall accumulate;
(g) the preferences, if any, and the amounts thereof
which the holders of any class or series thereof shall be
entitled to receive upon the
2
<PAGE>
voluntary or involuntary dissolution of, or upon any
distribution of the assets of, the Company;
(h) whether or not the shares of any class or series
shall be convertible into, or exchangeable for, the shares of
any other class or classes or of any other series of the same
or any other class or classes of stock of the Company and the
conversion price or prices or ratio or ratios or the rate or
rates at which such conversion or exchange may be made, with
such adjustments, if any, as shall be stated and expressed or
provided for in such resolution or resolutions; and
(i) such other special rights and protective
provisions with respect to any class or series as the Board
may deem advisable.
The shares of each class or series of the Preferred Stock may vary from
the shares of any other class or series thereof in any or all of the foregoing
respects. The Board may increase the number of shares of the Preferred Stock
designated for any existing class or series by a resolution adding to such class
or series authorized and unissued shares of the Preferred Stock not designated
for any other class or series. The Board may decrease the number of shares of
the Preferred Stock designated for any existing class or series by a resolution,
subtracting from such series unissued shares of the Preferred Stock designated
for such class or series, and the shares so subtracted shall become authorized,
unissued and undesignated shares of the Preferred Stock.
B. PROVISIONS RELATING TO THE COMMON STOCK
1. Except as otherwise required by law or as may be provided
by the resolutions of the Board authorizing the issuance of any class
or series of Preferred Stock, as hereinabove provided, all rights to
vote and all voting power shall be vested exclusively in the holders of
the Common Stock.
2. Subject to the rights of the holders of the Preferred
Stock, the holders of the Common Stock shall be entitled to receive
when, as and if declared by the Board, out of funds legally available
therefor, dividends payable in cash, stock or otherwise.
3. Upon any liquidation, dissolution or winding-up of the
Company, whether voluntary or involuntary, and after the holders of the
Preferred Stock shall have been paid in full the amounts to which they
shall be entitled (if any) or a sum sufficient for such payment in full
shall have been set aside, the remaining net assets of the Company
shall be distributed pro rata to the holders of the Common Stock in
accordance with their respective rights and interests to the exclusion
of the holders of the Preferred Stock.
3
<PAGE>
C. GENERAL PROVISIONS.
1. Except as may be provided by the resolutions of the Board
authorizing the issuance of any class or series of Preferred Stock, as
hereinabove provided, cumulative voting by any stockholder is hereby
expressly denied.
2. No stockholder of the Company shall have, by reason of
its holding shares of any class or series of stock of the Company, any
preemptive or preferential rights to purchase or subscribe for any
other shares of any class or series of the Company now or hereafter to
be authorized, and any other equity securities, or any notes,
debentures, warrants, bonds, or other securities convertible into or
carrying options or warrants to purchase shares of any class, now or
hereafter to be authorized, whether or not the issuance of any such
shares, or such notes, debentures, bonds or other securities, would
adversely affect the dividend, voting or other rights of such
stockholder.
ARTICLE VI
A. NUMBER AND TERM OF DIRECTORS. The Company's Board shall consist of
not less than four directors, with the exact number to be fixed from time to
time by resolution of the Board. The number of directors may be decreased at any
time and from time to time by a majority of the directors then in office, but
only to eliminate vacancies existing by reason of the death, resignation,
removal or expiration of the term of one or more directors. No decrease in the
number of directors shall have the effect of shortening the term of any
incumbent director. The Board shall be divided into three classes, Class I,
Class II and Class III. The number of directors elected to each class shall be
determined by the Board and shall be as nearly equal in number as possible. The
Board shall apportion any increase or decrease in the number of directorships
among the classes so as to make the number of directors in each class as nearly
equal as possible. Each director in Class I shall be elected to an initial term
to expire at the annual meeting next ensuing, each director in Class II shall be
elected to an initial term to expire one year thereafter, and each director in
Class III shall be elected to an initial term to expire two years thereafter, in
each case and until his or her successor is duly elected and qualified or until
his or her earlier resignation, death or removal from office. Upon the
expiration of the initial terms of office for each class of directors,
respectively, the directors of each class shall be elected for a term of three
years to serve until their successors are duly elected and qualified or until
their earlier resignation, death or removal from office.
B. DIRECTOR VACANCIES, REMOVAL. whenever any vacancy on the Board
shall occur due to death, resignation, retirement, disqualification, removal,
increase in the number of directors, or otherwise, only a majority of directors
in office, although less than a quorum of the entire Board, may fill the vacancy
or vacancies for the balance of the unexpired term or terms, at which time a
successor or successors shall be duly elected by the stockholders and qualified.
Stockholders shall not, and shall have no power to, fill any vacancy on the
Board. Stockholders may remove a director from office prior to the expiration of
his or her term, but only for "cause" by an affirmative vote of at least eighty
percent (80%) of the combined voting
4
<PAGE>
power of the outstanding shares of capital stock of the Company entitled to vote
for the election of directors, voting together as a single class.
C. AMENDMENT, ALTERATION OR REPEAL. The affirmative vote of at least
eighty percent (80%) of the combined voting power of the outstanding shares of
capital stock of the Company entitled to vote for the election of directors,
voting together as a single class, shall be required to amend, alter or repeal,
or adopt any provision inconsistent with, this Article VI.
ARTICLE VII
A. ACTION BY STOCKHOLDERS WITHOUT MEETING. Any action required or
permitted to be taken by the stockholders of the Company must be effected at a
duly called annual or special meeting of stockholders of the Company and may not
be effected by any consent in writing by such stockholders.
B. SPECIAL MEETINGS OF STOCKHOLDERS. Special meetings of stockholders
of the Company may be called only by the Chairman of the Board or the Chief
Executive Officer of the Company or by the Board pursuant to a resolution
approved by a majority of the entire Board. Only business within the purpose or
purposes described in the notice required by Section 222 of the Delaware General
Corporation Law may be conducted at a special meeting of stockholders.
C. STOCKHOLDER NOMINATIONS AND PROPOSALS. Advance notice of stockholder
nominations for the election of directors and of business to be brought by
stockholders before any meeting of stockholders of the Company shall be given in
the manner provided by the ByLaws of the Company.
D. AMENDMENT, ALTERATION OR REPEAL. The affirmative vote of at least
eighty percent (80%) of the combined voting power of the outstanding shares of
capital stock of the Company entitled to vote for the election of directors,
voting together as a single class, shall be required to amend, alter or repeal,
or adopt any provision inconsistent with, this Article VII.
ARTICLE VIII
No director of the Company shall be liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of the law, (iii)
under Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper benefit. It is the
intent that this provision be interpreted to provide the maximum protection
against liability afforded to directors under the Delaware General Corporation
Law in existence either now or hereafter.
5
<PAGE>
ARTICLE IX
The Company shall indemnify and shall advance expenses to its officers
and directors to the fullest extent permitted by law in existence either now or
hereafter.
ARTICLE X
The Directors of the Company shall have the power to adopt, amend or
repeal the bylaws of the Company.
IN WITNESS WHEREOF, the Company has caused this Amended and Restated
Certificate of Incorporation, which restates and integrates and further amends
the Amended and Restated Certificate of Incorporation as heretofore amended and
supplemented, and which has been duly adopted and approved pursuant to Section
242 and 245 of the Delaware General Corporation Law to be signed by Dr. Steven
R. Matzkin, its President, this _____ day of ______________, 1997.
DENTAL CARE ALLIANCE, INC.
By:
----------------------------------
Dr. Steven R. Matzkin, President
6
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
DENTAL CARE ALLIANCE, INC.
(A DELAWARE CORPORATION)
(_____________ 1997)
<PAGE>
<TABLE>
<CAPTION>
INDEX
PAGE
NUMBER
------
<S> <C> <C>
ARTICLE ONE - OFFICES............................................................................................1
Section 1. Registered Office...........................................................................1
Section 2. Other Offices...............................................................................1
ARTICLE TWO- MEETINGS OF STOCKHOLDERS............................................................................1
Section 1. Place.......................................................................................1
Section 2. Time of Annual Meeting......................................................................1
Section 3. Call of Special Meetings....................................................................2
Section 4. Conduct of Meetings.........................................................................2
Section 5. Notice and Waiver of Notice.................................................................2
Section 6. Business of Special Meeting.................................................................2
Section 7. Quorum......................................................................................2
Section 8. Required Vote...............................................................................3
Section 9. Voting of Shares............................................................................3
Section 10. Proxies.....................................................................................3
Section 11. Stockholder List............................................................................3
Section 12. Action Without Meeting......................................................................3
Section 13. Fixing Record Date..........................................................................3
Section 14. Inspectors and Judges.......................................................................4
Section 15. Advance Notice of Stockholder Proposed Business at Annual Meeting...........................4
ARTICLE THREE - DIRECTORS........................................................................................5
Section 1. - Number, Election and Term.......................................................................5
Section 2. Vacancies; Removal..........................................................................5
Section 3. Powers......................................................................................6
Section 4. Place of Meetings...........................................................................6
Section 5. Annual Meeting..............................................................................6
Section 6. Regular Meetings............................................................................6
Section 7. Special Meetings and Notice.................................................................6
Section 8. Quorum and Required Vote....................................................................6
Section 9. Action Without Meeting......................................................................7
Section 10. Telephone Meetings..........................................................................7
Section 11. Committees..................................................................................7
Section 12. Compensation of Directors...................................................................7
Section 13. Chairman of the Board.......................................................................7
Section 14. Stockholder Nominations of Director Candidates..............................................8
ARTICLE FOUR - OFFICERS..........................................................................................9
Section 1. Positions...................................................................................9
Section 2. Election of Specified Officers by Board.....................................................9
Section 3. Election or Appointment of Other Officers...................................................9
i
<PAGE>
Section 4. Salaries....................................................................................9
Section 5. Term........................................................................................9
Section 6. President...................................................................................9
Section 7. Vice Presidents............................................................................10
Section 8. Secretary..................................................................................10
ARTICLE FIVE - CERTIFICATES FOR SHARES..........................................................................11
Section 1. Issue of Certificates......................................................................11
Section 2. Legends for Preferences and Restrictions on Transfer.......................................11
Section 3. Facsimile Signatures.......................................................................12
Section 4. Lost Certificates..........................................................................12
Section 5. Transfer of Shares.........................................................................12
Section 6. Registered Stockholders....................................................................12
ARTICLE SIX - GENERAL PROVISIONS................................................................................12
Section 1. Dividends..................................................................................12
Section 2. Reserves...................................................................................12
Section 3. Checks.....................................................................................13
Section 4. Fiscal Year................................................................................13
Section 5. Seal.......................................................................................13
ARTICLE SEVEN - AMENDMENTS OF BYLAWS............................................................................13
</TABLE>
ii
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
DENTAL CARE ALLIANCE, INC.
(A DELAWARE CORPORATION)
(___________, 1997)
ARTICLE ONE
OFFICES
Section 1. REGISTERED OFFICE. The registered office of DENTAL CARE
ALLIANCE, INC., a Delaware corporation (the "Corporation"), shall be located in
the City of Wilmington, State of Delaware.
Section 2. OTHER OFFICES. The Corporation may also have offices at such
other places, either within or without the State of Delaware, as the Board of
Directors of the Corporation (the "Board of Directors") may from time to time
determine or as the business of the Corporation may require.
ARTICLE TWO
MEETINGS OF STOCKHOLDERS
Section 1. PLACE. All annual meetings of stockholders shall be held at
such place, within or without the State of Delaware, as may be designated by the
Board of Directors and stated in the notice of the meeting or in a duly executed
waiver of notice thereof. Special meetings of stockholders may be held at such
place, within or without the State of Delaware, and at such time as shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. TIME OF ANNUAL MEETING. Annual meetings of stockholders
shall be held on such date and at such time fixed, from time to time, by the
Board of Directors, provided, that there shall be an annual meeting held every
calendar year at which the stockholders shall
1
<PAGE>
elect a board of directors and transact such other business as may properly be
brought before the meeting.
Section 3. CALL OF SPECIAL MEETING. Special meetings of stockholders of
the Corporation may be called only by the Chairman of the Board or the Chief
Executive Officer of the Corporation or by the Board pursuant to a resolution
approved by a majority of the entire Board.
Section 4. CONDUCT OF MEETINGS. The Chairman of the Board (or in his
absence, the President or such other designee of the Chairman of the Board)
shall preside at the annual and special meetings of stockholders and shall be
given full discretion in establishing the rules and procedures to be followed in
conducting the meetings, except as otherwise provided by law or in these Bylaws.
Section 5. NOTICE AND WAIVER OF NOTICE. Written or printed notice
stating the place, day and hour of the meeting and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered not less than ten (10) nor more than sixty (60) days before the day of
the meeting, either personally or by first-class mail, by or at the direction of
the President, the Secretary, or the officer or person calling the meeting, to
each stockholder of record entitled to vote at such meeting. If the notice is
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the stockholder at his address as it appears on the
stock transfer books of the Corporation, with postage thereon prepaid. If a
meeting is adjourned to another time and/or place, and if an announcement of the
adjourned time and/or place is made at the meeting, it shall not be necessary to
give notice of the adjourned meeting unless the Board of Directors, after
adjournment, fixes a new record date for the adjourned meeting or if the
adjournment is for more than 30 days. Notice need not be given to any
stockholder who submits a written waiver of notice by him before or after the
time stated therein. Attendance of a person at a meeting of stockholders shall
constitute a waiver of notice of such meeting, except when a stockholder attends
a meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice.
Section 6. BUSINESS OF SPECIAL MEETING. Only business within the
purpose or purposes described in the notice required by Section 222 of the
Delaware General Corporation Law may be conducted at a special meeting of
stockholders.
Section 7. QUORUM. The holders of a majority of the shares entitled to
vote, represented in person or by proxy, shall constitute a quorum at meetings
of stockholders except as otherwise provided in the Corporation's certificate of
incorporation (the "Certificate of Incorporation"). If, however, a quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders present in person or represented by proxy shall have the power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum
2
<PAGE>
shall be present or represented, any business may be transacted that might have
been transacted at the meeting as originally notified and called. The
stockholders present at a duly organized meeting may continue to transact
business notwithstanding the withdrawal of some stockholders prior to
adjournment, but in no event shall a quorum consist of the holders of less than
one-third (1/3) of the shares entitled to vote and thus represented at such
meeting.
Section 8. REQUIRED VOTE. The vote of the holders of a majority of the
shares entitled to vote and represented at a meeting at which a quorum is
present shall be the act of the Corporation's stockholders, unless the vote of a
greater number is required by law, the Certificate of Incorporation, or these
Bylaws.
Section 9. VOTING OF SHARES. Each outstanding share, regardless of
class, shall be entitled to vote on each matter submitted to a vote at a meeting
of stockholders, except to the extent that the voting rights of the shares of
any class are limited or denied by the Certificate of Incorporation or the
General Corporation Law of Delaware.
Section 10. PROXIES. A stockholder may vote in person or by proxy
executed in writing by the stockholder or by his duly authorized
attorney-in-fact. No proxy shall be voted or acted upon after three (3) years
from the date of its execution unless otherwise provided in the proxy. Each
proxy shall be revocable unless expressly provided therein to be irrevocable,
and unless otherwise made irrevocable by law.
Section 11. STOCKHOLDER LIST. The officer or agent having charge of the
Corporation's stock transfer books shall make, at least ten (10) days before
each meeting of stockholders, a complete list of the stockholders entitled to
vote at such meeting or any adjournment thereof, arranged in alphabetical order,
with the address of, and the number and class and series, if any, of shares held
by each. Such list, for a period of ten (10) days prior to such meeting, shall
be subject to inspection by any stockholder at any time during the usual
business hours at the place where the meeting is to be held. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any stockholder during the whole time of the
meeting. The original stock transfer books shall be prima facie evidence as to
who are the stockholders entitled to examine such list or transfer book or to
vote at any such meeting of stockholders.
Section 12. ACTION WITHOUT MEETING. Any action required or permitted to
be taken by the stockholders of the Company must be effected at a duly called
annual or special meeting of stockholders of the Company and may not be effected
by any consent in writing by such stockholders.
Section 13. FIXING RECORD DATE. For the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of stockholders for any other proper purposes, the
Board of Directors may fix in advance a date as the record date for any such
determination of stockholders, such date in any case to be not more than sixty
(60) days, and, in case of a meeting of stockholders, not less than ten (10)
days, prior to the date on which the particular action requiring such
determination of stockholders is to be taken. If no
3
<PAGE>
record date is fixed for the determination of stockholders entitled to notice of
or to vote at a meeting of stockholders, or stockholders entitled to receive
payment of a dividend, the date on which the notice of the meeting is mailed or
the date on which the resolutions of the Board of Directors declaring such
dividend is adopted, as the case may be, shall be the record date for such
determination of stockholders. When a determination of stockholders entitled to
vote at any meeting of stockholders has been made as provided in this Section,
such determination shall apply to any adjournment thereof, except where the
Board of Directors fixes a new record date for the adjourned meeting.
Section 14. INSPECTORS AND JUDGES. The Board of Directors in advance of
any meeting may, but need not, appoint one or more inspectors of election or
judges of the vote, as the case may be, to act at the meeting or any adjournment
thereof. If any inspector or inspectors, or judge or judges, are not appointed,
the person presiding at the meeting may, but need not, appoint one or more
inspectors or judges. In case any person who may be appointed as an inspector or
judge fails to appear or act, the vacancy may be filled by the Board of
Directors in advance of the meeting, or at the meeting by the person presiding
thereat. The inspectors or judges, if any, shall determine the number of shares
of stock outstanding and the voting power of each, the shares of stock
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes, ballots and consents, hear and determine
all challenges and questions arising in connection with the right to vote, count
and tabulate votes, ballots and consents, determine the result, and do such acts
as are proper to conduct the election or vote with fairness to all stockholders.
On request of the person presiding at the meeting, the inspector or inspectors
or judge or judges, if any, shall make a report in writing of any challenge,
question or matter determined by him or them, and execute a certificate of any
fact found by him or them.
Section 15. ADVANCE NOTICE OF STOCKHOLDER PROPOSED BUSINESS AT ANNUAL
MEETING. At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be either (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board, (b) otherwise properly brought before the meeting by or at the
direction of the Board, or (c) otherwise properly brought before the meeting by
a stockholder. In addition to any other applicable requirements, for business to
be properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Company. To be timely, a stockholder's notice must be delivered to or mailed and
received at the principal executive offices of the Company, not less than ninety
(90) days nor more than one hundred and twenty (120) days prior to the first
anniversary of the date of the Company's notice of annual meeting provided with
respect to the previous year's annual meeting; provided, however, that if no
annual meeting was held in the previous year or the date of the annual meeting
has been changed to be more than thirty (30) calendar days earlier than or sixty
(60) calendar days after such anniversary, such notice by the stockholder to be
timely must be so received not more than ninety (90) days prior to the annual
meeting nor later than the later of (i) sixty (60) days prior to the annual
meeting or (ii) the close of business on the tenth (10th) day following the date
on which notice of the date of the annual meeting is given to stockholders or
made public, whichever first occurs. Such stockholder's notice to the Secretary
shall set forth as to each matter the stockholder proposes to bring before
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the annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and record address of the stockholder proposing
such business, (iii) the class and number of shares of capital stock of the
Company which are beneficially owned by the stockholder, and (iv) any material
interest of the stockholder in such business. The Chairman of an annual meeting
shall, if the facts warrant, determine and declare to the meeting that business
was not properly brought before the meeting in accordance with the requirements
of this Article Two, Section 15, and if he should so determine, he shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted.
Notwithstanding anything in the Bylaws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Article Two, Section 15; provided, however, that
nothing in this Article Two, Section 15 shall be deemed to preclude discussion
by any stockholder of any business properly brought before the annual meeting in
accordance with said procedure.
ARTICLE THREE
DIRECTORS
Section 1. NUMBER, ELECTION AND TERM. The number of directors of the
Corporation shall be fixed from time to time, within the limits specified by the
Certificate of Incorporation, by resolution of the Board of Directors; provided,
however, no director's term shall be shortened by reason of a resolution
reducing the number of directors. The directors shall be divided into classes
and be elected and hold office for such term or terms as provided in the
Certificate of Incorporation. Directors need not be residents of the State of
Delaware, stockholders of the Corporation or citizens of the United States.
Section 2. VACANCIES; REMOVAL. A director may resign at any time by
giving written notice to the Board of Directors or the Chairman of the Board.
Such resignation shall take effect at the date of receipt of such notice or at
any later time specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Whenever any vacancy on the Board shall occur due to death, resignation,
retirement, disqualification, removal, increase in the number of directors, or
otherwise, only a majority of directors in office, although less than a quorum
of the entire Board, may fill the vacancy or vacancies for the balance of the
unexpired term or terms, at which time a successor or successors shall be duly
elected by the stockholders and qualified. Stockholders shall not, and shall
have no power to, fill any vacancy on the Board. Stockholders may remove a
director from office prior to the expiration of his or her term, but only for
"cause" by an affirmative vote of at least eighty percent (80%) of the combined
voting power of the outstanding shares of capital stock of the Company entitled
to vote for the election of directors, voting together as a single class.
Section 3. POWERS. The business and affairs of the Corporation shall be
managed by its Board of Directors, which may exercise all such powers of the
Corporation and do all such
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lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these Bylaws directed or required to be exercised and done
by the stockholders.
Section 4. PLACE OF MEETINGS. Meetings of the Board of Directors,
regular or special, may be held either within or without the State of Delaware.
Section 5. ANNUAL MEETING. The first meeting of each newly elected
Board of Directors shall be held, without call or notice, immediately following
each annual meeting of stockholders.
Section 6. REGULAR MEETINGS. Regular meetings of the Board of Directors
may also be held without notice at such time and at such place as shall from
time to time be determined by the Board of Directors.
Section 7. SPECIAL MEETINGS AND NOTICE. Special meetings of the Board
of Directors may be called by the President or Chairman of the Board and shall
be called by the Secretary on the written request of any two directors. Written
notice of special meetings of the Board of Directors shall be given to each
director at least twenty-four (24) hours before the meeting. Except as required
by law, neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting. Notices to directors shall be in
writing and delivered personally or mailed to the directors at their addresses
appearing on the books of the Corporation. Notice by mail shall be deemed to be
given at the time when the same shall be received. Notice to directors may also
be given by telegram, and shall be deemed delivered when the same shall be
deposited at a telegraph office for transmission and all appropriate fees
therefor have been paid. Whenever any notice is required to be given to any
director, a waiver thereof in writing signed by the person or persons entitled
to such notice, whether before or after the time stated therein, shall be
equivalent to the giving of such notice. Attendance of a director at a meeting
shall constitute a waiver of notice of such meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
Section 8. QUORUM AND REQUIRED VOTE. A majority of the directors shall
constitute a quorum for the transaction of business and the act of the majority
of the directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors, unless a greater number is required by the
Certificate of Incorporation. If a quorum shall not be present at any meeting of
the Board of Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present. At such adjourned meeting at which a quorum shall be
present, any business may be transacted that might have been transacted at the
meeting as originally notified and called.
Section 9. ACTION WITHOUT MEETING. Any action required or permitted to
be taken at a meeting of the Board of Directors or committee thereof may be
taken without a meeting if a consent in writing, setting forth the action taken,
is signed by all of the members of
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the Board of Directors or the committee, as the case may be, and such consent
shall have the same force and effect as a unanimous vote at a meeting.
Section 10. TELEPHONE MEETINGS. Directors and committee members may
participate in and hold a meeting by means of conference telephone or similar
communication equipment by means of which all persons participating in the
meeting can hear each other. Participation in such a meetings shall constitute
presence in person at the meeting, except where a person participates in the
meeting for the express purpose of objecting to the transaction of any business
on the ground the meeting is not lawfully called or convened.
Section 11. COMMITTEES. The Board of Directors, by resolution adopted
by a majority of the whole Board of Directors, may designate from among its
members an executive committee and one or more other committees, each of which,
to the extent provided in such resolution, shall have and may exercise all of
the authority of the Board of Directors in the business and affairs of the
Corporation except where the action of the full Board of Directors is required
by statute. Vacancies in the membership of a committee shall be filled by the
Board of Directors at a regular or special meeting of the Board of Directors.
The executive committee shall keep regular minutes of its proceedings and report
the same to the Board of Directors when required. The designation of any such
committee and the delegation thereto of authority shall not operate to relieve
the Board of Directors, or any member thereof, of any responsibility imposed
upon it or him by law.
Section 12. COMPENSATION OF DIRECTORS. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 13. CHAIRMAN OF THE BOARD. The Board of Directors may, in its
discretion, choose a chairman of the board who shall preside at meetings of the
stockholders and of the directors. The Chairman of the Board shall have such
other powers and shall perform such other duties as shall be designated by the
Board of Directors. The Chairman of the Board shall be a member of the Board of
Directors but no other officers of the Corporation need be a director. The
Chairman of the Board shall serve until his successor is chosen and qualified,
but he may be removed at any time by the affirmative vote of a majority of the
Board of Directors.
Section 14. STOCKHOLDER NOMINATIONS OF DIRECTORS CANDIDATES. Only
persons who are nominated in accordance with the following procedures shall be
eligible for election as directors of the Corporation. Nominations of persons
for election to the Board at an annual or special meeting of stockholders may be
made by or at the direction of the Board by any nominating committee or person
appointed by the Board or by any stockholder of the Corporation entitled to vote
for the election of directors at the meeting who complies with the notice
procedures set forth in this Article Three, Section 14; provided, however, that
nominations of persons for election to the Board at a special meeting may be
made only if the election
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of directors is one of the purposes described in the special meeting notice
required by Section 222 of the Delaware General Corporation Law. Nominations of
persons for election at annual meetings, other than nominations made by or at
the direction of the Board, shall be made pursuant to timely notice in writing
to the Secretary of the Corporation. To be timely, a stockholder's notice must
be delivered to or mailed and received at the principal executive offices of the
Company, not less than ninety (90) days nor more than one hundred twenty (120)
days prior to the first anniversary of the date of the Company's notice of
annual meeting provided with respect to the previous year's annual meeting;
provided, however, that if no annual meeting was held in the previous year or
the date of the annual meeting has been changed to be more than thirty (30)
calendar days earlier than or sixty (60) calendar days after such anniversary,
such notice by the stockholder to be timely must be so received not more than
ninety (90) days prior to the annual meeting nor later than the later of (i)
sixty (60) days prior to the annual meeting or (ii) the close of business on the
tenth (10th) day following the date on which notice of the date of the annual
meeting is given to stockholders or made public, whichever first occurs. Such
stockholder's notice to the Secretary shall set forth (a) as to each person whom
the stockholder proposes to nominate for election or re-election as a director,
(i) the name, age, business address and residence address of the proposed
nominee, (ii) the principal occupation or employment of the proposed nominee,
(iii) the class and number of shares of capital stock of the Corporation which
are beneficially owned by the proposed nominee, and (iv) any other information
relating to the person that is required to be disclosed in solicitations for
proxies for election of directors pursuant to Rule 14a under the Securities
Exchange Act of 1934, as amended; and (b) as to the stockholder giving the
notice, (i) the name and record address of stockholder, and (ii) the class and
number of shares of capital stock of the Corporation which are beneficially
owned by the stockholder. The Corporation may require any proposed nominee to
furnish such other information as may reasonably be required by the Corporation
to determine the eligibility of such proposed nominee to serve as director of
the Corporation. No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth herein.
The Chairman of the meeting shall, if the facts warrant, determine and declare
to the meeting that a nomination was not made in accordance with the foregoing
procedure, and if he should so determine, he shall so declare to the meeting and
the defective nomination shall be disregarded.
ARTICLE FOUR
OFFICERS
Section 1. POSITIONS. The officers of the Corporation shall consist of
a President, one or more Vice Presidents and a Secretary and, if elected by the
Board of Directors by resolution, a Chairman of the Board. Any two or more
offices may be held by the same person.
Section 2. ELECTION OF SPECUFIED OFFICERS BY BOARD. The Board of
Directors at its first meeting after each annual meeting of stockholders shall
elect a President, one or more Vice Presidents and a Secretary.
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Section 3. ELECTION OR APPOINTMENT OF OTHER OFFICERS. Such other
officers and assistant officers and agents as may be deemed necessary may be
elected or appointed by the Board of Directors, or, unless otherwise specified
herein, appointed by the President of the Corporation. The Board of Directors
shall be advised of appointments by the President at or before the next
scheduled Board of Directors meeting.
Section 4. SALARIES. The salaries of all officers of the Corporation to
be elected by the Board of Directors pursuant to Article Four, Section 2 hereof
shall be fixed from time to time by the Board of Directors or pursuant to its
discretion. The salaries of all other elected or appointed officers of the
Corporation shall be fixed from time to time by the President of the Corporation
or pursuant to his direction.
Section 5. TERM. The officers of the Corporation shall hold office
until their successors are chosen and qualified. Any officer or agent elected or
appointed by the Board of Directors or the President of the Corporation may be
removed, with or without cause, by the Board of Directors whenever in its
judgment the best interests of the Corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. Any officers or agents appointed by the President of the Corporation
pursuant to Section 3 of this Article Four may also be removed from such officer
positions by the President, with or without cause. Any vacancy occurring in any
office of the Corporation by death, resignation, removal or otherwise shall be
filled by the Board of Directors, or, in the case of an officer appointed by the
President of the Corporation, by the President or the Board of Directors.
Section 6. PRESIDENT. The President shall be the Chief Executive
Officer of the Corporation, shall have general and active management of the
business of the Corporation and shall see that all orders and resolutions of the
Board of Directors are carried into effect. In the absence of the Chairman of
the Board or in the event the Board of Directors shall not have designated a
chairman of the board, the President shall preside at meetings of the
stockholders and the Board of Directors.
Section 7. VICE PRESIDENTS. The Vice Presidents in the order of their
seniority, unless otherwise determined by the Board of Directors, shall, in the
absence or disability of the President, perform the duties and exercise the
powers of the President. They shall perform such other duties and have such
other powers as the Board of Directors shall prescribe or as the President may
from time to time delegate.
Section 8. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the stockholders and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or President, under whose supervision he shall be. He shall keep in
safe custody the seal of the Corporation and, when authorized by the Board of
Directors, affix the same to any instrument requiring it.
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ARTICLE FIVE
CERTIFICATES FOR SHARES
Section 1. ISSUE OF CERTIFICATES. The shares of the Corporation shall
be represented by certificates, provided that the Board of Directors of the
Corporation may provide by resolution or resolutions that some or all of any or
all classes or series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock represented
by certificates (and upon request every holder of uncertificated shares) shall
be entitled to have a certificate signed by, or in the name of the Corporation
by the chairman or vice-chairman of the Board of Directors, or the President or
Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the Corporation, representing the number of shares
registered in certificate form.
Section 2. LEGENDS FOR PREFERENCES AND RESTRICTIONS ON TRANSFER. If the
Corporation shall be authorized to issue more than one class of stock or more
than one series of any class, the powers, designations, preferences and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the Corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided by law, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the Corporation shall issue to represent such class or
series of stock, a statement that the Corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
A written restriction on the transfer or registration of transfer of a
security of the Corporation, if permitted by law and noted conspicuously on the
certificate representing the security may be enforced against the holder of the
restricted security or any successor or transferee of the holder including an
executor, administrator, trustee, guardian or other fiduciary entrusted with
like responsibility for the person or estate of the holder. Unless noted
conspicuously on the certificate representing the security, a restriction, even
though permitted by law, is ineffective except against a person with actual
knowledge of the restriction. If the Corporation issues any shares that are not
registered under the Securities Act of 1933, as amended, and registered or
qualified under the applicable state securities laws, the transfer of any such
shares shall be restricted substantially in accordance with the following
legend:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER
THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE LAW,
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OR (2) AT HOLDER'S EXPENSE, AN OPINION (SATISFACTORY TO THE
CORPORATION) OF COUNSEL (SATISFACTORY TO THE CORPORATION) THAT
REGISTRATION IS NOT REQUIRED."
Section 3. FACSIMILE SIGNATURES. Any and all signatures on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon such
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of the issue.
Section 4. LOST CERTIFICATES. The Corporation may issue a new
certificate of stock in place of any certificate therefore issued by it, alleged
to have been lost, stolen or destroyed, and the Corporation may require the
owner of the lost, stolen, or destroyed certificate, or his legal representative
to give the Corporation a bond sufficient to indemnify it against any claim that
may be made against it on account of the alleged loss, theft or destruction of
any such certificate or the issuance of such new certificate.
Section 5. TRANSFER OF SHARES. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 6. REGISTERED STOCKHOLDERS. The Corporation shall be entitled
to recognize the exclusive rights of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of the State
of Delaware.
ARTICLE SIX
GENERAL PROVISIONS
Section 1. DIVIDENDS. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in
cash, property, or its own shares pursuant to law and subject to the provisions
of the Certificate of Incorporation.
Section 2. RESERVES. The Board of Directors may by resolution create a
reserve or reserves out of earned surplus for any proper purpose or purposes,
and may abolish any such reserve in the same manner.
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Section 3. CHECKS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 4. FISCAL YEAR. The fiscal year of Corporation shall end on
December 31 of each year, unless otherwise fixed by resolution of the Board of
Directors.
Section 5. SEAL. The corporate seal shall have inscribed thereon the
name and state of incorporation of the Corporation. The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced.
ARTICLE SEVEN
AMENDMENTS OF BYLAWS
These Bylaws may be altered, amended or repealed or new Bylaws may be
adopted at any meeting of the Board of Directors at which a quorum is present,
by the affirmative vote of a majority of the directors present at such meeting;
provided, however, that the affirmative vote of either (i) at least eighty
percent (80%) of the combined voting power of the outstanding shares of capital
stock of the Company entitled to vote for the election of directors, voting
together as a single class, or (ii) the majority of the entire Board of
Directors, shall be required to alter, amend or repeal, or adopt any provision
inconsistent with, Sections 3, 6, 12 or 15 of Article Two, Sections 1, 2 or 14
of Article Three or this Article Seven.
12
SEE EXHIBITS 3.1 AND 3.2
EXHIBIT 10.1
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT, dated as of the ____ day of
___________, 1997, between DENTAL CARE ALLIANCE, INC., a Delaware corporation
(the "Company"), and NAME, a resident of the State of STATE (the "Indemnitee").
RECITALS
A. The Indemnitee is currently an officer and/or director of the
Company.
B. As a condition to the Indemnitee's agreement to continue to serve
the Company, the Indemnitee requires that he be indemnified from liability to
the fullest extent permitted by law.
C. The Company is willing to indemnify the Indemnitee to the fullest
extent permitted by law to obtain the benefit of the continued services of the
Indemnitee.
NOW, THEREFORE, for and in consideration of the mutual premises and
covenants contained herein, the Company and the Indemnitee agree as follows:
SECTION 1. MANDATORY INDEMNIFICATION IN PROCEEDINGS OTHER THAN THOSE BY
OR IN THE RIGHT OF THE COMPANY. Subject to Section 4 hereof, the Company shall
indemnify and hold harmless the Indemnitee from and against any and all claims,
damages, expenses (including attorneys' fees), judgments, penalties, fines
(including excise taxes assessed with respect to an employee benefit plan),
settlements, and all other liabilities incurred or paid by him in connection
with the investigation, defense, prosecution, settlement or appeal of 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 Company) and to which the Indemnitee was or is a party or is
threatened to be made a party by reason of the fact that the Indemnitee is or
was an officer, director, shareholder, employee or agent of the Company, or is
or was serving at the request of the Company as an officer, director, partner,
trustee, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, or by reason of anything done
or not done by the Indemnitee in any such capacity or capacities, provided that
the Indemnitee acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
SECTION 2. MANDATORY INDEMNIFICATION IN PROCEEDINGS BY OR IN THE RIGHT
OF THE COMPANY. Subject to Section 4 hereof, the Company shall indemnify and
hold harmless the Indemnitee from and against any and all expenses (including
attorneys' fees) and amounts actually and reasonably incurred or paid by him in
connection with the investigation, defense, prosecution, settlement or appeal of
any threatened, pending or
<PAGE>
completed action, suit or proceeding by or in the right of the Company to
procure a judgment in its favor, whether civil, criminal, administrative or
investigative, and to which the Indemnitee was or is a party or is threatened to
be made a party by reason of the fact that the Indemnitee is or was an officer,
director, shareholder, employee or agent of the Company, or is or was serving at
the request of the Company as an officer, director, partner, trustee, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, or by reason of anything done or not done by
the Indemnitee in any such capacity or capacities, provided that (i) the
Indemnitee acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company and (ii) no indemnification
shall be made under this Section 2 in respect of any claim, issue or matter as
to which the Indemnitee shall have been adjudged to be liable to the Company for
misconduct in the performance of his duty to the Company unless, and only to the
extent that, the court in which such proceeding was brought (or any other court
of competent jurisdiction) shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, the
Indemnitee is fairly and reasonably entitled to indemnity for such expenses
which such court shall deem proper.
SECTION 3. REIMBURSEMENT OF EXPENSES FOLLOWING ADJUDICATION OF
NEGLIGENCE. The Company shall reimburse the Indemnitee for any expenses
(including attorneys' fees) and amounts actually and reasonably incurred or paid
by him in connection with the investigation, defense, settlement or appeal of
any action or suit described in Section 2 hereof that results in an adjudication
that the Indemnitee was liable for negligence, gross negligence or recklessness
(but not willful misconduct) in the performance of his duty to the Company;
provided, however, that the Indemnitee acted in good faith and in a manner he
believed to be in the best interests of the Company.
SECTION 4. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under
Sections 1 and 2 hereof (unless ordered by a court) and any reimbursement made
under Section 3 hereof shall be made by the Company only as authorized in the
specific case upon a determination (the "Determination") that indemnification or
reimbursement of the Indemnitee is proper in the circumstances because the
Indemnitee has met the applicable standard of conduct set forth in Section 1, 2
or 3 hereof, as the case may be. Subject to Sections 5.6, 5.7 and 8 of this
Agreement, the Determination shall be made in the following order of preference:
(a) first, by the Company's Board of Directors (the "Board")
by majority vote or consent of a quorum consisting of directors ("Disinterested
Directors") who are not, at the time of the Determination, named parties to such
action, suit or proceeding; or
(b) next, if such a quorum of Disinterested Directors cannot
be obtained, by majority vote or consent of a committee duly designated by the
Board (in which designation all directors, whether or not Disinterested
Directors, may participate) consisting solely of two or more Disinterested
Directors; or
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(c) next, if such a committee cannot be designated, by any
independent legal counsel (who may be any outside counsel regularly employed by
the Company) in a written opinion; or
(d) next, if such legal counsel determination cannot be
obtained, by vote or consent of the holders of a majority of the Company's
common stock.
4.1. NO PRESUMPTIONS. 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 Indemnitee did not act in good faith and in a manner that he reasonably
believed to be in or not opposed to the best interests of the Company, and with
respect to any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
4.2. BENEFIT PLAN CONDUCT. The Indemnitee's conduct with respect
to an employee benefit plan for a purpose he reasonably believed to be in the
interests of the participants in and beneficiaries of the plan shall be deemed
to be conduct that the Indemnitee reasonably believed to be not opposed to the
best interests of the Company.
4.3. RELIANCE AS SAFE HARBOR. For purposes of any Determination
hereunder, the Indemnitee shall be deemed to have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company, or, with respect to any criminal action or proceeding, to have had
no reasonable cause to believe his conduct was unlawful, if his action is based
on (i) the records or books of account of the Company or another enterprise,
including financial statements, (ii) information supplied to him by the officers
of the Company or another enterprise in the course of their duties, (iii) the
advice of legal counsel for the Company or another enterprise, or (iv)
information or records given or reports made to the Company or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Company or another enterprise.
The term "another enterprise" as used in this Section 4.3 shall mean any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise of which the Indemnitee is or was serving at the request of the
Company as an officer, director, partner, trustee, employee or agent. The
provisions of this Section 4.3 shall not be deemed to be exclusive or to limit
in any way the other circumstances in which the Indemnitee may be deemed to have
met the applicable standard of conduct set forth in Sections 1, 2 or 3 hereof,
as the case may be.
4.4. SUCCESS ON MERITS OR OTHERWISE. Notwithstanding any other
provision of this Agreement, to the extent that the Indemnitee has been
successful on the merits or otherwise in defense of any action, suit or
proceeding described in Section 1 or 2 hereof, 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 with the
investigation, defense, settlement or appeal thereof. For purposes of this
Section 4.4, the term "successful on the merits or otherwise" shall include, but
not be limited to, (i) any termination, withdrawal, or dismissal (with or
without prejudice) of any claim, action, suit or proceeding against the
Indemnitee
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without any express finding of liability or guilt against him, (ii) the
expiration of 120 days after the making of any claim or threat of an action,
suit or proceeding without the institution of the same and without any promise
or payment made to induce a settlement, or (iii) the settlement of any action,
suit or proceeding under Section 1, 2 or 3 hereof pursuant to which the
Indemnitee pays less than $10,000.
4.5. PARTIAL INDEMNIFICATION OR REIMBURSEMENT. If the Indemnitee
is entitled under any provision of this Agreement to indemnification and/or
reimbursement by the Company for some or a portion of the claims, damages,
expenses (including attorneys' fees), judgments, fines or amounts paid in
settlement by the Indemnitee in connection with the investigation, defense,
settlement or appeal of any action specified in Section 1, 2 or 3 hereof, but
not, however, for the total amount thereof, the Company shall nevertheless
indemnify and/or reimburse the Indemnitee for the portion thereof to which the
Indemnitee is entitled. The party or parties making the Determination shall
determine the portion (if less than all) of such claims, damages, expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement for
which the Indemnitee is entitled to indemnification and/or reimbursement under
this Agreement.
SECTION 5. PROCEDURES FOR DETERMINATION OF WHETHER STANDARDS HAVE BEEN
SATISFIED. 5.1 1. COSTS. All costs of making the Determination required by
Section 4 hereof shall be borne solely by the Company, including, but not
limited to, the costs of legal counsel, proxy solicitations and judicial
determinations. The Company shall also be solely responsible for paying (i) all
reasonable expenses incurred by the Indemnitee to enforce this Agreement,
including, but not limited to, the costs incurred by the Indemnitee to obtain
court-ordered indemnification pursuant to Section 8 hereof, regardless of the
outcome of any such application or proceeding, and (ii) all costs of defending
any suits or proceedings challenging payments to the Indemnitee under this
Agreement.
5.2. TIMING OF THE DETERMINATION. The Company shall use its best
efforts to make the Determination contemplated by Section 4 hereof promptly. In
addition, the Company agrees:
(a) if the Determination is to be made by the Board or a
committee thereof, such Determination shall be made not later than 15 days after
a written request for a Determination (a "Request") is delivered to the Company
by the Indemnitee;
(b) if the Determination is to be made by independent legal
counsel, such Determination shall be made not later than 30 days after a Request
is delivered to the Company by the Indemnitee; and
(c) if the Determination is to be made by the stockholders of
the Company, such Determination shall be made not later than 90 days after a
Request is delivered to the Company by the Indemnitee.
The failure to make a Determination within the above-specified time period shall
constitute a Determination approving full indemnification or reimbursement of
the Indemnitee.
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Notwithstanding anything herein to the contrary, a Determination may be made in
advance of (i) the Indemnitee's payment (or incurring) of expenses with respect
to which indemnification or reimbursement is sought, and/or (ii) final
disposition of the action, suit or proceeding with respect to which
indemnification or reimbursement is sought.
5.3. REASONABLENESS OF EXPENSES. The evaluation and finding as to
the reasonableness of expenses incurred by the Indemnitee for purposes of this
Agreement shall be made (in the following order of preference) within 15 days of
the Indemnitee's delivery to the Company of a Request that includes a reasonable
accounting of expenses incurred:
(a) first, by the Board by a majority vote of a quorum
consisting of Disinterested Directors; or
(b) next, if a quorum cannot be obtained under subdivision
(a), by majority vote or consent of a committee duly designated by the Board (in
which designation all directors, whether or not Disinterested Directors, may
participate), consisting solely of two or more Disinterested Directors; or
5.4. PAYMENT OF INDEMNIFIED AMOUNT. Immediately following a
Determination that the Indemnitee has met the applicable standard of conduct set
forth in Section 1, 2 or 3 hereof, as the case may be, and the finding of
reasonableness of expenses contemplated by Section 5.3 hereof, or the passage of
time prescribed for making such determination(s), the Company shall pay to the
Indemnitee in cash the amount to which the Indemnitee is entitled to be
indemnified and/or reimbursed, as the case may be, without further authorization
or action by the Board; provided, however, that the expenses for which
indemnification or reimbursement is sought have actually been incurred by the
Indemnitee.
5.5. STOCKHOLDER VOTE ON DETERMINATION. Notwithstanding the
provisions of the Delaware Statute, the Indemnitee and any other stockholder who
is a party to the proceeding for which indemnification or reimbursement is
sought shall be entitled to vote on any Determination to be made by the
Company's stockholders, including a Determination made pursuant to Section 5.7
hereof. In addition, in connection with each meeting at which a stockholder
Determination will be made, the Company shall solicit proxies that expressly
include a proposal to indemnify or reimburse the Indemnitee. The Company proxy
statement relating to the proposal to indemnify or reimburse the Indemnitee
shall not include a recommendation against indemnification or reimbursement.
5.6. SELECTION OF INDEPENDENT LEGAL COUNSEL. If the Determination
required under Section 4 is to be made by independent legal counsel, such
counsel shall be selected by the Indemnitee with the approval of the Board,
which approval shall not be unreasonably withheld. The fees and expenses
incurred by counsel in making any Determination (including Determinations
pursuant to Section 5.8 hereof) shall be borne solely by the Company regardless
of the results of any Determination and, if requested by counsel, the Company
shall give such counsel an appropriate written agreement with respect to the
payment of their fees and expenses and such other matters as may be reasonably
requested by counsel.
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5.7. RIGHT OF INDEMNITEE TO APPEAL AN ADVERSE DETERMINATION BY
BOARD. If a Determination is made by the Board or a committee thereof that the
Indemnitee did not meet the applicable standard of conduct set forth in Section
1, 2 or 3 hereof, upon the written request of the Indemnitee and the
Indemnitee's delivery of $500 to the Company, the Company shall cause a new
Determination to be made by the Company's stockholders at the next regular or
special meeting of stockholders. Subject to Section 8 hereof, such Determination
by the Company's stockholders shall be binding and conclusive for all purposes
of this Agreement.
5.8. RIGHT OF INDEMNITEE TO SELECT FORUM FOR DETERMINATION. If, at
any time subsequent to the date of this Agreement, "Continuing Directors" do not
constitute a majority of the members of the Board, or there is otherwise a
change in control of the Company (as contemplated by Item 403(c) of Regulation
S-K), then upon the request of the Indemnitee, the Company shall cause the
Detemination required by Section 4 hereof to be made by independent legal
counsel selected by the Indemnitee and approved by the Board (which approval
shall not be unreasonably withheld), which counsel shall be deemed to satisfy
the requirements of clause (3) of Section 4 hereof. If none of the legal counsel
selected by the Indemnitee are willing and/or able to make the Determination,
then the Company shall cause the Determination to be made by a majority vote or
consent of a Board committee consisting solely of Continuing Directors. For
purposes of this Agreement, a "Continuing Director" means either a member of the
Board at the date of this Agreement or a person nominated to serve as a member
of the Board by a majority of the then Continuing Directors.
5.9. ACCESS BY INDEMNITEE TO DETERMINATION. The Company shall
afford to the Indemnitee and his representatives ample opportunity to present
evidence of the facts upon which the Indemnitee relies for indemnification or
reimbursement, together with other information relating to any requested
Determination. The Company shall also afford the Indemnitee the reasonable
opportunity to include such evidence and information in any Company proxy
statement relating to a stockholder Determination.
5.10. JUDICIAL DETERMINATIONS IN DERIVATIVE SUITS. In each action
or suit described in Section 2 hereof, the Company shall cause its counsel to
use its best efforts to obtain from the Court in which such action or suit was
brought (i) an express adjudication whether the Indemnitee is liable for
negligence or misconduct in the performance of his duty to the Company, and, if
the Indemnitee is so liable, (ii) a determination whether and to what extent,
despite the adjudication of liability but in view of all the circumstances of
the case (including this Agreement), the Indemnitee is fairly and reasonably
entitled to indemnification.
SECTION 6. SCOPE OF INDEMNITY. The actions, suits and proceedings
described in Sections 1 and 2 hereof shall include, for purposes of this
Agreement, any actions that involve, directly or indirectly, activities of the
Indemnitee both in his official capacities as a Company director or officer and
actions taken in another capacity while serving as director or officer,
including, but not limited to, actions or proceedings involving (i) compensation
paid to the Indemnitee by the Company, (ii) activities by the Indemnitee on
behalf of the Company, including actions in which the Indemnitee is plaintiff,
(iii) actions alleging a misappropriation of
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a "corporate opportunity," (iv) responses to a takeover attempt or threatened
takeover attempt of the Company, (v) transactions by the Indemnitee in Company
securities, and (vi) the Indemnitee's preparation for and appearance (or
potential appearance) as a witness in any proceeding relating, directly or
indirectly, to the Company. In addition, the Company agrees that, for purposes
of this Agreement, all services performed by the Indemnitee on behalf of, in
connection with or related to any subsidiary of the Company, any employee
benefit plan established for the benefit of employees of the Company or any
subsidiary, any corporation or partnership or other entity in which the Company
or any subsidiary has a 5% ownership interest, or any other affiliate shall be
deemed to be at the request of the Company.
SECTION 7. ADVANCE FOR EXPENSES.
7.1. MANDATORY ADVANCE. Expenses (including attorneys' fees)
incurred by the Indemnitee in investigating, defending, settling or appealing
any action, suit or proceeding described in Section 1 or 2 hereof shall be paid
by the Company in advance of the final disposition of such action, suit or
proceeding. The Company shall promptly pay the amount of such expenses to the
Indemnitee, but in no event later than 10 days following the Indemnitee's
delivery to the Company of a written request for an advance pursuant to this
Section 7, together with a reasonable accounting of such expenses.
7.2. UNDERTAKING TO REPAY. The Indemnitee hereby undertakes and
agrees to repay to the Company any advances made pursuant to this Section 7 if
and to the extent that it shall ultimately be found that the Indemnitee is not
entitled to be indemnified by the Company for such amounts.
7.3. MISCELLANEOUS. The Company shall make the advances
contemplated by this Section 7 regardless of the Indemnitee's financial ability
to make repayment, and regardless whether indemnification of the Indemnitee by
the Company will ultimately be required. Any advances and undertakings to repay
pursuant to this Section 7 shall be unsecured and interest-free.
SECTION 8. COURT-ORDERED INDEMNIFICATION. Regardless whether the
Indemnitee has met the standard of conduct set forth in Sections 1, 2 or 3
hereof, as the case may be, and notwithstanding the presence or absence of any
Determination whether such standards have been satisfied, the Indemnitee may
apply for indemnification (and/or reimbursement pursuant to Section 3 or 12
hereof) to the court conducting any proceeding to which the Indemnitee is a
party or to any other court of competent jurisdiction. On receipt of an
application, the court, after giving any notice the court considers necessary,
may order indemnification (and/or reimbursement) if it determines the Indemnitee
is fairly and reasonably entitled to indemnification (and/or reimbursement) in
view of all the relevant circumstances (including this Agreement).
SECTION 9. NONDISCLOSURE OF PAYMENTS. Except as expressly required by
Federal securities laws, neither party shall disclose any payments under this
Agreement unless prior approval of the other party is obtained. Any payments to
the Indemnitee
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that must be disclosed shall, unless otherwise required by law, be described
only in Company proxy or information statements relating to special and/or
annual meetings of the Company's stockholders, and the Company shall afford the
Indemnitee the reasonable opportunity to review all such disclosures and, if
requested, to explain in such statement any mitigating circumstances regarding
the events reported.
SECTION 10. COVENANT NOT TO SUE, LIMITATION OF ACTIONS AND RELEASE
OF CLAIMS. No legal action shall be brought and no cause of action shall be
asserted by or on behalf of the Company (or any of its subsidiaries) against the
Indemnitee, his spouse, heirs, executors, personal representatives or
administrators after the expiration of 2 years from the date the Indemnitee
ceases (for any reason) to serve as either an officer or a director of the
Company, and any claim or cause of action of the Company (or any of its
subsidiaries) shall be extinguished and deemed released unless asserted by
filing of a legal action within such 2-year period.
SECTION 11. INDEMNIFICATION OF INDEMNITEE'S ESTATE. Notwithstanding
any other provision of this Agreement, and regardless whether indemnification of
the Indemnitee would be permitted and/or required under this Agreement, if the
Indemnitee is deceased, the Company shall indemnify and hold harmless the
Indemnitee's estate, spouse, heirs, administrators, personal representatives and
executors (collectively the "Indemnitee's Estate") against, and the Company
shall assume, any and all claims, damages, expenses (including attorneys' fees),
penalties, judgments, fines and amounts paid in settlement actually incurred by
the Indemnitee or the Indemnitee's Estate in connection with the investigation,
defense, settlement or appeal of any action described in Section 1 or 2 hereof.
Indemnification of the Indemnitee's Estate pursuant to this Section 11 shall be
mandatory and not require a Determination or any other finding that the
Indemnitee's conduct satisfied a particular standard of conduct.
SECTION 12. REIMBURSEMENT OF ALL LEGAL EXPENSES. Notwithstanding any
other provision of this Agreement, and regardless of the presence or absence of
any Determination, the Company promptly (but not later than 30 days following
the Indemnitee's submission of a reasonable accounting) shall reimburse the
Indemnitee for all attorneys' fees and related court costs and other expenses
incurred by the Indemnitee in connection with the investigation, defense,
settlement or appeal of any action described in Section 1 or 2 hereof
(including, but not limited to, the matters specified in Section 6 hereof).
SECTION 13. MISCELLANEOUS.
13.1. NOTICE PROVISION. Any notice, payment, demand or
communication required or permitted to be delivered or given by the provisions
of this Agreement shall be deemed to have been effectively delivered or given
and received on the date personally delivered to the respective party to whom it
is directed, or when deposited by registered or certified mail, with postage and
charges prepaid and addressed to the parties at the addresses set forth below
opposite their signatures to this Agreement.
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13.2. ENTIRE AGREEMENT. Except for the Company's Certificate of
Incorporation, this Agreement constitutes the entire understanding of the
parties and supersedes all prior understandings, whether written or oral,
between the parties with respect to the subject matter of this Agreement.
13.3. SEVERABILITY OF PROVISIONS. If any provision of this
Agreement is held to be illegal, invalid, or unenforceable under present or
future laws effective during the term of this Agreement, such provision shall be
fully severable; this Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part of this
Agreement; and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore, in
lieu of each such illegal, invalid, or unenforceable provision there shall be
added automatically as a part of this Agreement a provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible and be
legal, valid, and enforceable.
13.4. APPLICABLE LAW. This Agreement shall be governed by and
construed under the laws of the State of Delaware.
13.5. EXECUTION IN COUNTERPARTS. This Agreement and any amendment
may be executed simultaneously or in counterparts, each of which together shall
constitute one and the same instrument.
13.6. COOPERATION AND INTENT. The Company shall cooperate in good
faith with the Indemnitee and use its best efforts to ensure that the Indemnitee
is indemnified and/or reimbursed for liabilities described herein to the fullest
extent permitted by law.
13.7. AMENDMENT. No amendment, modification or alteration of the
terms of this Agreement shall be binding unless in writing, dated subsequent to
the date of this Agreement, and executed by the parties.
13.8. BINDING EFFECT. The obligations of the Company to the
Indemnitee hereunder Shall survive and continue as to the Indemnitee even if the
Indemnitee ceases to be a director, officer, employee and/or agent of the
Company. Each and all of the covenants, terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the successors to the Company
and, upon the death of the Indemnitee, to the benefit of the estate, heirs,
executors, administrators and personal representatives of the Indemnitee.
13.9. NONEXCLUSIVITY. The rights of indemnification and
reimbursement provided in this Agreement shall be in addition to any rights to
which the Indemnitee may otherwise be entitled by statute, bylaw, agreement,
vote of stockholders or otherwise.
13.10. EFFECTIVE DATE. The provisions of this Agreement shall
cover claims, actions, suits and proceedings whether now pending or hereafter
commenced and shall be
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retroactive to cover acts or omissions or alleged acts or omissions which
heretofore have taken place.
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EXECUTED AS OF THE DATE FIRST ABOVE WRITTEN.
ADDRESS: THE COMPANY:
- -------- ------------
1343 Main Street, 7th Floor DENTAL CARE ALLIANCE, INC.
Sarasota, Florida 34326
Attention: President
By:
--------------------------------
Title:
-----------------------------
ADDRESS: THE INDEMNITEE:
- -------- ---------------
- ------------------------------------
- ------------------------------------
- ------------------------------------ -----------------------------------
Name: NAME
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EXHIBIT 10.2
DENTAL CARE ALLIANCE, INC.
ADMINISTRATIVE SERVICES AGREEMENT
THIS ADMINISTRATIVE SERVICES AGREEMENT (the "Agreement") effective this
____ day of __________, 19__, ("Effective Date") between and among DENTAL CARE
ALLIANCE, INC., a Delaware corporation ("DCA"); ______________________________,
a professional association ("PA") and ______________________________, a dentist
who is the sole stockholder, owning all of the issued and outstanding stock of
the P.A. (the "Stockholder").
I. RECITALS
WHEREAS, DCA is a company with expertise in the provision of business
and administrative services to dental practices; and
WHEREAS, the PA is a corporation duly organized and validly existing
under all applicable state law and regulation, and whose stock is owned by the
Stockholder, and
WHEREAS, the PA desires that DCA provide it with the business and
administrative services described in the Agreement, in order for the PA to avail
itself of DCA's expertise and efficiencies, and DCA desires to provide such
services to the PA; and
WHEREAS, the parties mutually desire that the PA shall maintain
complete control over and responsibility for all aspects of the Practice's
operations that constitute the practice of dentistry under applicable state law.
NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
II. DUTIES AND OBLIGATIONS OF DCA
2.1 GENERAL. DCA will provide the PA with all of the business and
administrative services required for the day-to-day operations of the Practice,
as set forth in Exhibit B to this Agreement, attached hereto and incorporated by
reference herein. The PA appoints DCA as its sole and exclusive agent described
in this Agreement, and DCA hereby accepts such appointment. Notwithstanding
anything else in the Agreement, the parties expressly acknowledge that DCA is
not authorized or qualified to engage in any activity that may be deemed or
construed to constitute the practice of dentistry, nor shall DCA be regarded as
practicing dentistry within the meaning of applicable state dental laws and
regulations. To the extent that any act or service herein required by DCA should
be construed by a court of competent jurisdiction or by state dental regulatory
authorities with jurisdiction over this Agreement to constitute the practice of
dentistry, the requirement to perform that act or service shall be deemed waived
and unenforceable and shall not constitute a breach, or default by DCA under
this Agreement, and the parties shall take the actions contemplated by SECTION
9.11 hereof.
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2.2 PROVISIONS OF OFFICE AND EQUIPMENT. DCA shall consult with the PA
on its office and equipment needs and will provide or arrange for the provision
to the PA, at the expense of the PA, the offices, and improvements requested by
the PA for the operation of the Practice, all of the aforementioned as will be
mutually agreeable to the parties (collectively referred to as the "Offices and
Equipment"). The office space provided pursuant to sublease in the form of
EXHIBIT C attached hereto (the "Office Lease"). It is expressly understood and
agreed that the PA shall have complete custody and control over the Offices and
Equipment, consistent with the control over leased property that is customarily
granted to lessees under standard commercial leases.
2.3 EMPLOYMENT OF NON-DENTAL STAFF. DCA will employ and provide to the
PA the non-dental staff required for the operation of the Practice, provided
that the hiring and termination of such staff shall be at the direction of DCA,
in consultation with PA.
2.4 BILLING AND COLLECTIONS SERVICES. ICA will supervise billing and
collections services for all patient services rendered at the Practice, provided
that all billing and collections will be done in the name of the PA Pursuant to
its performance of the billings and collections function, DCA will take
possession of and endorse in the name of the PA all payments from patients,
insurance companies and other third party payors, and promptly deposit all such
funds in an account designated for the benefit of the PA as discussed in SECTION
2.5 below. The PA hereby appoints DCA for the term of this Agreement to be its
true and lawful attorney-in-fact for the purposes set forth in this section. DCA
will prepare and submit financial reports to the PA detailing billings and
collections on a monthly basis. In order to consolidate and maximize the return
on cash, PA grants DCA authority to consolidate the cash accounts of all managed
practices with each practice being credited with interest earned on balances
contributed and debited for interest deferred on balances advanced.
2.5 BANKING ARRANGEMENTS. All monies collected for the PA by DCA
pursuant to Section 2.4 above shall be deposited into an account designated to
the benefit of the PA (the "PA designated account") for which the sole signatory
shall be one or more duly authorized representatives of DCA, with a bank whose
deposits are insured with the Federal Deposit Insurance Corporation. DCA shall
be responsible for making all disbursements from the account, which shall be
limited to the disbursements authorized by this Agreement. DCA shall make all
disbursements promptly when payable, and shall account to the PA for all funds
disbursed from the PA designated account, and make available to PA, upon
request, and during normal business hours at the place of business of DCA,
copies of all bank account statements
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III. DUTIES AND OBLIGATIONS OF THE PA
3.1 PROFESSIONAL RESPONSIBILITIES. The PA shall have complete
authority, responsibility, supervision and control over the provision of all
dental services to patients and all other acts that are considered to constitute
the practice of dentistry under applicable state dental laws and regulations.
3.2 EMPLOYMENT OF DENTISTS. The PA will provide dental services to the
public through the services of dentists ("Dentists") who are employed by the PA
pursuant to employment agreements ("Employment Agreements") in the form of
Exhibit D attached hereto.
3.3 CONTROL OF BUSINESS OPERATIONS. Notwithstanding the authority
granted to DCA pursuant to ARTICLES II AND IV of this Agreement, it is expressly
acknowledged and agreed by the parties that the PA shall have approval over the
following business decisions:
(a) The hiring and termination of the Practice's dental
professionals. Dental professionals shall constitute dentists
and hygienists only;
(b) The dental equipment used by the Practice;
(c) Patient scheduling;
(d) The dental supplies and laboratory used by the Practice;
(e) Marketing, and
(f) Any other aspects of the Practice's operations that are
considered to be within the practice of dentistry under
applicable state dental laws and regulations.
3.4 HOURS OF OPERATION. The PA represents and agrees that it will be
open to the public on a full time schedule of eight hours per day, a minimum of
five days per week (except for reasonable holiday), with appropriate staffing by
Dentists, hygienists and assistants, throughout the term of the Agreement,
unless mutually agreed upon otherwise.
3.5 PATIENT RECORDS. The PA will prepare and maintain at the Practice
accurate, complete and timely records of all services rendered to patients at
the Practice. All patient records shall be the property and remain under the
control and custody of the PA at all times during and after the term of this
Agreement. The records shall be prepared and maintained in compliance with all
applicable state and federal laws and regulations. DCA shall have access to the
patient records of the PA only for the limited purposes necessary to perform its
duties under this Agreement, and subject to all applicable laws and regulations
governing the confidentiality of such records.
3.6 AGREEMENT NOT TO ENCUMBER OR ALLOW TO BE ENCUMBERED. PA and
Stockholder agree that as part of the inducement to DCA to enter into this
transaction, and related transactions, including but not necessarily limited to
loans, guaranty of loans, leases, or license
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agreements, DCA has considered and relied upon the credit worthiness and
reliability of PA and Stockholder. PA and Stockholder covenant and agree not to
sell, convey, transfer, lease or further encumber any interest in or any part of
the assets of the PA, or assets of the Stockholder including but not necessarily
limited to his stock in the PA, without the prior written consent of DCA, and
any such sale, conveyance, transfer, lease or encumbrance made without DCA's
prior written consent shall be void. If any person should obtain an interest in
all or any part of the assets or stock of the PA, pursuant to the execution or
enforcement of a lien, security interest, judgment or other right, such event
shall be deemed to be a transfer and an event of default hereunder. PA and
Stockholder covenant and agree not to effectuate or attempt to effectuate any
change in ownership or control of PA without the prior written consent of DCA,
and do herein represent and warrant to DCA that Stockholder presently owns and
holds all of the issued and outstanding shares of stock of the PA.
IV. FINANCIAL ARRANGEMENTS
4.1 PRACTICE OPERATING EXPENSES. DCA will be responsible for paying for
the Practice's operating expenses, which shall include expenses incurred by DCA
in connection with the performance of those services discussed in ARTICLE II and
EXHIBIT E of this Agreement (the "Practice Expenses"), provided that the PA
shall pay DCA its monthly service fee and if such service fee shall not be
sufficient to cover practice expenses, PA shall be responsible for any overage
paid by DCA.
4.2 EXPENSES OF THE PA. The PA will be responsible for payment of the
salary and benefits and professional liability insurance for the Dentists (the
"Dentist Expenses"), and other Practice dental professionals employed directly
by the PA and any other expenses of the Practice or the PA that are not included
within the definition of Practice Expenses. Disbursements for such expenses
shall be made by DCA from the PA designated account in accordance with SECTION
2.5 of this Agreement.
4.3 SERVICE FEE. Each month DCA will deduct from the PA designated
account a service fee payable by the PA to DCA (the "Service Fee"), which shall
be determined as set forth in EXHIBIT F where Service Fee and net collected
revenues are defined.
4.4 LOANS. If requested by the PA, DCA may, but is not obligated to,
provide loans to the PA to fund the PA's working capital requirements.
Stockholder shall be required to personally and unconditionally guarantee all
such loans. Such loans, if any, will accrue interest at the current borrowing
rate of DCA.
V. INSURANCE AND INDEMNITY
5.1 INSURANCE TO BE MAINTAINED BY THE PA. The PA covenants and agrees
that throughout the term of this Agreement, it will maintain comprehensive
professional liability insurance with limits of not less than $300,000 per claim
and with aggregate policy limits of not less than $1,000,000 per each Dentist,
with each PA and DCA being an additional insured. The PA shall be responsible
for all such liabilities in excess of the limits of such policies. DCA
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agrees to negotiate for and cause premiums to be paid with respect to such
insurance. Premiums and deductibles with respect to such policies shall be a
Practice Expense.
5.2 INSURANCE TO BE, MAINTAINED BY DCA. DCA agrees that throughout the
term of this Agreement, it will maintain property and casualty insurance on the
property described in Exhibit A, with premiums and deductibles with respect to
such policies being a Practice expense.
5.3 ADDITIONAL INSUREDS. The PA agrees to use every effort to have DCA
named as an additional insured on its professional liability insurance program.
5.4 INDEMNIFICATION. The PA and Stockholder shall jointly and severally
indemnify, hold harmless and defend DCA and its officers, directors,
shareholders and employees, from and against any and all liability, loss,
damage, claim, causes of action, and expenses (including reasonable attorney's
fees), whether or not covered by insurance, caused or asserted to have been
caused, directly or indirectly, by or as a result of the performance of medical
or dental services or the performance of any intentional acts, negligent acts or
omissions by the PA and/or the Stockholder or PA's agents, employees and/or
subcontractors (other than DCA) during the term hereof DCA shall indemnify, hold
harmless and defend the PA and Stockholder and its or their employees, from and
against any and all liability, loss, damage, claim, causes of action, and
expenses (including, reasonable attorney's fees), caused or asserted to have
been caused, directly by or as a result of intentional acts by DCA and/or its
shareholders, agents, employees and/or subcontractors (other than the PA and/or
Stockholder), in connection with the services provided or required to be
provided by DCA, during the term of this Agreement.
VI. TERM AND TERMINATION
6.1 TERM OF AGREEMENT. This Agreement shall have a term of twenty five
(25) years beginning on October 25, l996 and renewing each and every year on
October 25 of the subsequent year for an additional twenty five (25) year term
unless properly terminated as provided below.
6.2 TERMINATION OF AGREEMENT. This Agreement may be terminated as
provided for in this Section, it being expressly agreed that termination of this
Agreement by any party shall serve to terminate the Agreement against all
parties.
(a) TERMINATION FOR CAUSE. In the event that DCA, on one hand, or
the PA or the Stockholder, on the other hand, shall materially
default in the performance of any duty, obligation, covenant
or agreement imposed upon it, them or him by, or made by it,
them or him pursuant to this Agreement and such default shall
continue for a period of 30 days after written notice thereof
has been given to the defaulting party by the non-defaulting
party, the non-defaulting party may terminate this Agreement
immediately upon written notice to the defaulting party. In
the event Stockholder loses his license to practice dentistry,
either by revocation, termination or suspension, same shall be
deemed a material default. In the event Stockholder is
disabled (unable to fully perform all the normal and routine
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dental services of a licensed dentist, and is unable to
perform all such services either for any continuous forty-five
(45) day period, or for a period of forty-five (4,) calendar
days within any period of one hundred eighty (180) consecutive
calendar days, (excluding normal vacations), then same shall
be deemed a material default. For the purposes of this
Section, any default by the Stockholder shall be deemed a
default by the PA and any default by the PA shall be deemed a
default by the Stockholder. It is expressly agreed by the PA
and thc Stockholder that a default of this Agreement by PA or
Stockholder shall be deemed to be a default of the sublease
for the Practice's office and a default between the PA and
Stockholder in the License Agreement between the parties. A
copy of the License Agreement is attached hereto and marked
EXHIBIT G. It is further expressly agreed by the PA and
Stockholder that a default in any one of the agreements set
forth above, will constitute a default in all agreements set
forth above, at the option of DCA.
(b) TERMINATION BY REASON OF INSOLVENCY. In the event of the
filing of a petition in bankruptcy pursuant to Chapter 7 of
the federal bankruptcy laws or an assignment for the benefit
of creditors by either DCA, on one hand, or the PA or the
Stockholder on the other hand, or upon other action taken or
suffered, voluntarily or involuntarily, under any federal or
state law for the benefit of debtors by such party, except for
the filing of a petition of involuntary bankruptcy against a
party which is dismissed within thirty (30) days thereafter,
the non-defaulting party may give written notice of the
immediate termination of this Agreement.
(c) TERMINATION WITHOUT CAUSE. In the event that the PA and the
Stockholder desire to discontinue the dental practice
maintained at the Practice pursuant to this Agreement (the
"Practice") at any time during the term of this Agreement, the
PA and the Stockholder may terminate this Agreement without
cause in the event that: (i) DCA shall be provided at least 90
days' prior written notice of such intent to terminate this
Agreement, and (ii) the Practice shall be sold or otherwise
transferred to another licensed dentist acceptable to DCA, who
as a tern of such sale, personally assumes the obligations and
liabilities of the PA and the Stockholder under this Agreement
for the then remaining balance of the ten of this Agreement,
and (iii) the continuity of the Practice is maintained
throughout negotiations for the assignment, and to the
effective date of the agreed assignee's liability under this
Agreement. There shall be no lapse in the duties and
obligations of the parties under this Administrative Services
Agreement.
(d) In the event that PA or the Stockholder or both shall
materially default in the performance of any duty, obligation,
covenant or agreement imposed upon it, him or them, pursuant
to this Agreement, and/or pursuant to the
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sublease, and/or pursuant to the license agreement between the
PA and Stockholder with DCA, and such default shall continue
for a period of thirty (30) days after written notice thereof
has been given to defaulting party or parties by the
non-defaulting party, PA and Stockholder agree that DCA or
DCA's designated licensed dentist shall have the option to
purchase all of the stock of thc Stockholder and/or all of the
assets of the PA according to the following formula: Sixty
percent (60%) of the annualized gross revenues of the practice
over the previous twenty-four (24) months minus any
liabilities of the PA as of the date of the sale.
6.3 ACTIONS UPON TERMINATION OF THIS AGREEMENT.
(a) Upon termination or expiration of this Agreement for any
reason:
(i) The PA shall promptly return all DCA Proprietary
Information to DCA and otherwise comply with the
covenants and agreements of SECTION, 7.l, 7.3, 7.4
and 7.5. hereof;
(ii) DCA shall return all PA Proprietary Information to
the PA, and otherwise comply with the covenants and
agreements of SECTION 7.2 hereof;
(iii) The PA and Stockholder shall promptly repay DCA all
advances, loans and other amounts due hereunder and
any interest due thereon, and assume all debt and all
contracts and payables authorized by this Agreement
to be incurred by DCA and which relate to the
performance of DCA's obligations under this
Agreement; and
(iv) DCA shall render a final accounting for monies
deposited in, and disbursed from, the PA designated
account.
(b) It is expressly agreed by the parties that the obligations of
this SECTION 6.3 shall survive the termination or expiration
of this Agreement.
VII. CONFIDENTIALLY AGREEMENTS
7.1 CONFIDENTIALITY AGREEMENT OF THE PA AND THE STOCKHOLDER. The PA and
the Stockholder jointly and severally acknowledge and agree that all business
information and materials provided to them by DCA pursuant to this Agreement
shall be considered the property of DCA ("DCA Proprietary Information"), and
further agree that they shall not rent, sell, give away or otherwise utilize DCA
Proprietary Information in any business activity or for any business purpose
other than as required to fulfill their obligations under this Agreement. The PA
and the Stockholder jointly and severally agree, and shall cause their
employees, agents and shareholders to agree that DCA Proprietary Information
shall be kept confidential and, unless otherwise required by law, regulation or
valid court order, shall not be disclosed to any person
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except as authorized by DCA in writing. Upon termination of this Agreement, the
PA and the Stockholder jointly and severally agree that they shall promptly
return to DCA all DCA Proprietary Information then in their possession or
control.
7.2 CONFIDENTIALITY AGREEMENT OF DCA. DCA acknowledges and agrees that
all business information and materials provided or made available to it by the
PA and the Stockholder pursuant to this Agreement shall be considered the
property of the PA and the Stockholder ("PA Proprietary Information"), and
further agrees that it shall nor rent, sell, give away or otherwise utilize PA
Proprietary Information in any business activity or for any business purpose
other than as required to fulfill its obligations under this Agreement. DCA
further agrees, the PA Proprietary Information shall be kept confidential and,
unless otherwise required by law, regulation or valid court order, shall not be
disclosed to any person except as authorized by the PA in writing. Upon
termination of this Agreement, DCA agrees that it shall promptly return to the
PA all PA Proprietary Information then in its possession or control.
Notwithstanding the foregoing, it is expressly acknowledged and agreed by the PA
and the Stockholder that, in the event of termination of the Agreement for cause
by DCA or termination without cause by the PA or the Stockholder, the
requirements of this Section shall not prohibit DCA or dentists associated with
the PA subject to all applicable laws governing the confidentiality of patient
records and the consent of the patients in question, arranging for the transfer
of patient records to such other dentist.
Notwithstanding the foregoing, it is further expressly acknowledged and
agreed by the PA and the Stockholder, that in the event DCA or DCA's designated
licensed dentist exercises the option as set forth in 6.2(d), the requirements
of this Section shall not prohibit DCA or dentists associated with the PA,
subject to all applicable laws governing the confidentiality of patient records
and the consent of the patients in question, arranging for the transfer of
patient records to such other dentists.
7.3 TRADE SECRETS COVENANT. During the term of this Agreement and for
an additional five (5) year period from the termination of the same, PA and
Stockholder agree that they will not disclose to any person or entity any trade
secrets of DCA including, but not limited to, manuals, operating Systems,
reporting systems, training systems that the PA and Stockholder have become
privy to or have used during; their involvement with DCA. This covenant on the
part of PA and Stockholder shall be construed as an agreement.
7.4. NONSOLICITATION AGREEMENT. PA and Stockholder agree that they
shall not during or at any time after termination or expiration of this
Agreement solicit any employees of DCA to leave DCA or become employed by either
of them or any entity with which either of them is directly or indirectly
related. PA and Stockholder agree that during this agreement and for one year
subsequent to the proper termination or expiration hereof, it or he will not
solicit any customers, clients, buyers, distributors, or manufacturers to cease
doing business with DCA, or to do business with them or any entity' business,
corporation or partnership with which either PA and/or Stockholder are either
directly or indirectly related.
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7.5 RETURN OF DCA DOCUMENT, INFORMATION OR PRODUCTS. PA and Stockholder
agree that upon termination or expiration of this Agreement with DCA for any
reason, they shall immediately, but no long than (10) business days on such
termination, return to DCA all documents or information in any form or medium
whether written or electronic either owned by DCA, or to which DCA has a right
of possession, including, but not limited to, customer lists, pricing lists,
commercial material, manufacturers, information, correspondence, financial
information, etc. In addition, PA and Stockholder shall return all products,
samples and any and all research regarding same by appropriate carrier to DCA
immediately, by no later than ten (10) business days from the termination or
expiration of this Agreement. PA and Stockholder further agree to return any and
all equipment, computers. vehicles, etc. either owned by or to which DCA has a
right of possession, immediately upon termination or expiration of this
Agreement or within (10) business days from termination or expiration. The
return of such documentation, information and/or products and equipment shall be
a strict condition precedent to the payment of any and all commissions/salary or
any other compensation, if any' then due and owing to PA and/or Stockholder, and
the failure to return documents, products or equipment in a timely manner shall
entitle DCA to withhold any and all payments due to PA and/or Stockholder until
compliance with these provisions.
VIII. INDEPENDENT CONTRACTORS
8.1 INDEPENDENT RELATIONSHIP. DCA intends to act and perform as an
independent contractor of the PA, and the provisions hereof are not intended to
create any partnership, joint venture, agency or employment relationship between
the parties. The PA, the Stockholder and the Dentists will not have any claim
under this Agreement, or otherwise, against DCA for vacation pay, sick leave,
unemployment insurance, worker's compensation, disability benefits or employee
or any other employment related benefits of any nature or kind.
IX. GENERAL PROVISIONS
9.1 ASSIGNMENT. DCA shall have the right to assign or sell its rights
and obligations hereunder to any person, corporation, partnership or other legal
entity. Except as set forth above, neither DCA nor the PA shall have the right
to assign their respective rights and obligations hereunder without the written
consent of the other party. Subject to this provision, this Agreement shall be
binding upon the parties hereto and their successors and assigns.
9.2 WHOLE AGREEMENT MODIFICATION. There are no other agreements or
understandings, written or oral, between the parties regarding this Agreement
and the Exhibits, other than as set forth herein. This Agreement shall not be
modified or amended except by a written document executed by all parties to this
Agreement.
9.3 NOTICES. All notices, consents' waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when: (a) delivered by hand (with written confirmation of receipt), (b)
sent by facsimile transmission (with written confirmation of receipt), provided
that a copy is mailed by certified mail, return receipt requested, or (c) when
received by the addressee. If sent by a nationally recognized overnight delivery
service (receipt requested), in each case to the appropriate addresses and
facsimile
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numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by written notice to the other parties with such written
notice to be given as set forth in this section).
To: PA: Value Plus Dental Center of Bradenton, P.A.
230 Manatee Avenue East
Bradenton, FL 34208
AND TO STOCKHOLDER:
Dennis Corona
4138 Antler Trail
Sarasota, FL 34238
TO DCA: Dental Care Alliance, Inc
1343 Main Street, 7th Floor
Sarasota, Florida 34236
Facsimile No (941) 366-9615
Attention: Dr Steven Matzkin
WITH A COPY TO Abel, Band, Russell, Collier, Pitchford
and Gordon Chartered
P.0. Box 49948
Sarasota, FL 34230
Facsimile No: (941) 366-3999
Attention: Cheryl L. Gordon, Esquire
9.4 WAIVER OF PROVISION. Any waiver of any 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.
9.5 GOVERNING LAW. The validity, interpretation and performance of this
Agreement shall be governed by and construed in accordance with the laws of the
State of Florida.
9.6 EVENTS EXCUSING PERFORMANCE. Neither party shall be liable to the
other party for failure to perform any of thc services required herein in the
event of strikes, lock outs, Acts of God, unavailability of supplies or other
events over which that party has no control for so long as such events continue,
and for a reasonable period of time thereafter.
9.7 COMPLIANCE WITH APPLICABLE LAWS. All parties shall comply with all
applicable federal, state and local laws, regulations and restrictions in the
conduct of their obligations under this Agreement.
9.8 SEVERABILITY. The provisions of this Agreement shall be deemed
severally and if any portion shall be held invalid, illegal or unenforceable for
any reason, the remainder of this Agreement shall be effective and binding upon
the parties.
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9.9 ADDITIONAL DOCUMENTS. Each of the parties hereto agrees to execute
any documents or documents that may be requested from time to time by any other
party to implement or complete such party's obligation's pursuant to this
Agreement.
9.10 ATTORNEY'S FEES. If legal action is commenced by any party to
enforce or defend its rights under this Agreement, the prevailing party in such
action shall be entitled to recover its costs and reasonable attorneys' fees in
addition to any other relief granted.
9.11 CONTRACT MODIFICATIONS FOR PROSPECTIVE LEGAL EVENTS. In the event
any state or federal laws or regulations, now existing or enacted or promulgated
after the effective date of this Agreement, are interpreted by judicial
decision, a regulatory agency or legal counsel for both parties in such a manner
as to indicate that the structure of this Agreement may be in violation of such
laws or regulations, the PA, Stockholder and DCA shall amend this Agreement as
necessary to the maximum extent possible, any such amendment shall preserve the
underlying economic and financial arrangements between the PA, Stockholder and
the DCA.
9.12 REMEDIES CUMULATIVE. No remedy set forth in this Agreement or
otherwise conferred upon or reserved to any party by law shall be considered
exclusive of any other remedy available to any party, but the same shall be
distinct, separate and cumulative and may be exercised from time to time as
often as occasion may arise or as may be deemed expedient.
9.13 LANGUAGE CONSTRUCTION. The language in all parts of this Agreement
shall be construed, in all cases, according to parties acknowledgement that each
party and its Counsel have renewed and revised this Agreement and that the
norma1 rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of this Agreement.
9.14 NO OBLIGATION TO THIRD PARTIES. None of the obligations and duties
of any party under this Agreement shall in any way or in any manner be deemed to
create any obligation to, or any rights in, any person or entity not a party to
this Agreement.
9.15 ENTIRE AGREEMENT/AMENDMENTS. This Agreement supersedes all
previous contacts and agreements between the parties respecting the subject
matter of this Agreement. As between or among the parties, no oral statement or
prior written material not specifically incorporated herein shall be of any
force and effect. This Agreement may be executed in two or more counterparts,
each and all of which shall be deemed an original and all of which together
shall constitute but one and the same instrument and shall not be amended,
altered or changed except by a written amendment signed by the parties hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
PA
By: _____________________________________________
Signature
PRESIDENT
_____________________________________________
Printed Name
STOCKHOLDERS:
By: _____________________________________________
Signature
PRESIDENT
_____________________________________________
Printed Name
DCA: DENTAL CARE ALLIANCE, INC.
a Delaware corporation
By: _____________________________________________
Signature
STEVEN MATZKIN, PRESIDENT
Steven Matzkin
_____________________________________________
Printed Name
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EXHIBIT A
PRACTICE LOCATION
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EXHIBIT B
BUSINESS AND ADMINISTRATIVE SERVICES PROVIDED BY DCA
DCA shall be responsible for providing all business and administrative
services required for the routine day-to-day operations of the Practice'
operations, only as follows; and otherwise as deemed reasonable necessary by
DCA, or in the sole discretion of DCA as may be reasonably requested by PA.
(a) Employment and training of the Practice's non-professional staff.
(b) Payroll administration and accounting.
(c) Consulting advice on staff salaries, benefits and performance and
incentive plans.
(d) Recruitment of additional dentists.
(e) Facilitating the ordering of supplies.
(f) Bookkeeping and accounting Preparation of monthly financial
statements providing true, correct and complete copies thereto for
PA each month, as and when same are completed. Preparation of
budgets and monitoring of actual results versus budgets.
(g) Processing and distribution of all checks, including but not
limited to, payroll, payables, taxes and rents, and provisions of
copies of all bank statements to PA on a monthly basis promptly
after the same are received by DCA.
(h) Provision of business forms, and provision of consulting advice of
business procedures and systems.
(i) Establishment of administrative controls to assure against theft.
(j) Billing and collections supervision.
(k) Marketing and advertising.
(1) Installation of computer hardware and software. Training of stain
utilization.
(m) Preparation of statistical data and analysis of office operations
(n) Provision of consulting advice on improving office efficiency.
(o) Provision of consulting advice on office location and layouts.
(p) Negotiation of office leases.
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(q) Legal service for the Practice's routine operations (not including
professional liability or malpractice defense).
(r) Solicitation of and assistance in negotiations of managed care
contracts.
(s) Consulting services and advice (as requested) on employee
efficiency and productivity.
(t) Patient fee schedules, is consultation with PA owner.
(u) On behalf of the PA, and with the PA's funds (there is no
independent obligation of DCA to anyone to make any payments except
to the extent of the availability of PA funds) payment of all
accounts and notes payable as and when the same become due and
payable in accordance with their respective terms.
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EXHIBIT C
SUBLEASE
NONE
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EXHIBIT D
EMPLOYMENT AGREEMENT
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EXHIBIT E
PRACTICE EXPENSES
(Headings and groupings below are for informational purposes and are subject to
change based on accounting purposes)
P.A. PRACTICE EXPENSES
Dentist and Dental Professional Compensation
Hygienist Compensation
Payroll Taxes and Benefits for Dentists, Dental Professionals,
Hygienists
Malpractice Insurance
DCA Licensing Fees
PA Debt Service
DCA PRACTICE EXPENSES
COST OF SALES
Dental Supplies
Implant Supplies
Lab Expense - Internal
Lab Expense - External
OPERATING EXPENSES, COMPENSATION & BENEFITS, SALARIES & WAGES
Dental Assistant Wages
Administrative Wages
Bonuses
PAYROLL TAXES
Medicare Tax Expense
FICA Tax Expense
FUTA Tax Expense
SUTA Tax Expense
BENEFITS
Health Insurance
FACILITIES
Rent - Office
Rent - Other
Telephone
Pest Control
Cleaning Service
Utilities
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REPAIRS MAINTENANCE
Dental Equipment
Computer Equipment
Building
Office Equipment
ADVERTISING
Television
Newspaper
Yellow Pages
Magazines
Direct Mail
Seminars
OUTSIDE SERVICES
Accounting Services
Payroll Services
Auditing Services
Legal Services
Temporary Help
Misc. Outside Services
LEASE EXPENSE
Dental Equipment Lease
Telephone Lease
Computer Lease
Office Equipment Lease
INSURANCE
Workers Compensation Insurance
Liability Insurance
Misc. Insurance
GENERAL OFFICE EXPENSES
Administrative Support
Vehicle Expense
Computer Expense
Contributions & Donations
Dues Subscriptions
Office Expenses
Small Equipment Tools
Operating Supplies
Uniforms
Postage & Freight
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MISCELLANEOUS EXPENSES
Balk Charges
Cash Over/Short
Check Guarantee Fees
Credit Card Charges
License, Fees & Permits
Taxes - Other
Property Taxes
Sales Taxes
State Taxes
Reimbursement Expenses
Other Misc. Expenses
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EXHIBIT F
DEFINITION OF SERVICE FEE AND NET COLLECTED REVENUE
Net collected revenue shall be defined as:
total collected revenue on cash basis minus any patient refunds.
Service fee shall be defined as:
74% of net collected revenue.
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EXHIB1T G
LICENSE AGREEMENT
22
EXHIBIT 10.6
DENTAL CARE ALLIANCE, INC.
ADMINISTRATIVE SERVICES AGREEMENT
THIS ADMINISTRATIVE SERVICES AGREEMENT (the "Agreement") effective this
___ day of _________, 1997, ("Effective Date") between and among DENTAL CARE
ALLIANCE, INC., a Delaware corporation ("DCA"); EIGHT MILE DENTAL, P.C., a
Michigan corporation; GRATIOT AVENUE DENTAL, P.C., a Michigan corporation; WAYNE
ROAD DENTAL, P.C., a Michigan corporation, and WASHINGTON BOULEVARD DENTAL,
P.C., a Michigan corporation (collectively "PCs"); and ROSS JOHNSON, D.D.S, a
licensed Michigan dentist who is the sole stockholder, owning all of the issued
and outstanding stock of the PCs (the "Stockholder").
I. RECITALS
WHEREAS, DCA has purchased by separate agreement, certain Management
Agreements between Ross Management Company, a Michigan corporation, and each of
the PCs pursuant to which Ross Management Company provided various management
services and support for each of the PCs (the "Old Management Agreements"). For
purposes of making DCA's duties and responsibilities pursuant to the Old
Management Agreements consistent with its operational activities and obligations
under its standard Administrative Services Agreement in the form hereof, the
parties hereto have agreed to enter into this Agreement in substitution of all
of the Old Management Agreements. Upon execution and delivery hereof, all of the
Old Management Agreements shall be fully terminated and of no further force or
effect without any further action required by the parties and the parties'
relationship shall be governed by this Agreement.
WHEREAS, DCA is a company with expertise in the provision of business
and administrative services to dental practices; and
WHEREAS, each PC is a corporation duly organized and validly existing
under all applicable state law and regulation, and whose stock is owned by the
Stockholder; and
WHEREAS, each PC owns and operates a dental practice (the "Practice")
at the location specified on EXHIBIT A attached hereto; and
WHEREAS, each PC desires that DCA provide it with the business and
administrative services described in this Agreement, in order for the to avail
itself of DCA's expertise and efficiencies, and DCA desires to provide such
services to each PC; and
<PAGE>
WHEREAS, the parties mutually desire that the PC shall maintain
complete control over and responsibility for all aspects of the Practice's
operations that constitute the practice of dentistry under applicable state law.
NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
II. DUTIES AND OBLIGATIONS OF DCA
2.1 GENERAL. DCA will provide the PC with all of the business and
administrative services required for the day-to-day operations of the Practice,
as set forth in EXHIBIT B to this Agreement, attached hereto and incorporated by
reference herein. The PC appoints DCA as its sole and exclusive agent for the
provision of the business and administrative services described in this
Agreement, and DCA hereby accepts such appointment. Notwithstanding anything
else in this Agreement, the parties expressly acknowledge that DCA is not
authorized or qualified to engage in any activity that may be deemed or
construed to constitute the practice of dentistry, nor shall DCA be regarded as
practicing dentistry within the meaning of applicable state dental laws and
regulations. To the extent that any act or service herein required by DCA should
be construed by a court of competent jurisdiction or by state dental regulatory
authorities with jurisdiction over this Agreement to constitute the practice of
dentistry, the requirement to perform that act or service shall be deemed waived
and unenforceable and shall not constitute a breach or default by DCA under this
Agreement, and the parties shall take the actions contemplated by SECTION 9.11
hereof.
2.2 PROVISIONS OF OFFICE AND EQUIPMENT. DCA will consult with each PC
on its office and equipment needs, and will provide or arrange for the provision
to the PC, at the expense of the PC, the offices, and improvements requested by
the PC for the operation of the Practice, all of the aforementioned as will be
mutually agreeable to the parties (collectively referred to as the "Offices and
the Equipment"). It is expressly understood and agreed that each PC shall have
complete custody and control over the Offices and Equipment.
2.3 BILLING AND COLLECTIONS SERVICES. DCA will supervise billing and
collections services for all patient services rendered at the Practice, provided
that all billings and collections will be done in the name of the PC. Pursuant
to its performance of the billings and collections function, DCA will take
possession of and endorse in the name of the PCs all payments from patients,
insurance companies and other third party payors, and promptly deposit all such
funds in an account
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designated for the benefit of the PCs discussed in SECTION 2.4 below. DCA will
prepare and submit financial reports to each PC detailing billings and
collections on a monthly basis.
2.4 BANKING ARRANGEMENTS. All monies collected for the PC by DCA
pursuant to SECTION 2.3 above shall be deposited into an account designated to
the benefit of the PCs (the "PCs designated account") with a bank whose deposits
are insured with the Federal Deposit Insurance Corporation. DCA shall be
responsible for making all disbursements from the account, which shall be
limited to the disbursements authorized by this Agreement. DCA shall make all
disbursements promptly when payable, and shall account to the PCs for all funds
disbursed from the PCs designated account, and make available to PCs, upon
request, and during normal business hours at the place of business of DCA,
copies of all bank account statements.
III. DUTIES AND OBLIGATIONS OF THE PCS
3.1 PROFESSIONAL RESPONSIBILITIES. The PCs shall have complete
authority, responsibility, supervision and control over the provision of all
dental services to patients and all other acts that are considered to constitute
the practice of dentistry under applicable state dental laws and regulations.
3.2 EMPLOYMENT OF DENTISTS. The PCs will provide dental services to the
public through the services of dentists ("Dentists") who are employed by the PCs
pursuant to employment agreements ("Employment Agreements") with the PCs.
3.3 CONTROL OF BUSINESS OPERATIONS. Notwithstanding the authority
granted to DCA pursuant to ARTICLES II AND IV of this Agreement, it is expressly
acknowledged and agreed by the parties that the PC shall have approval over the
following business decisions:
(a) The hiring and termination of the Practice's dental
professionals and all staff;
(b) The dental equipment used by the Practice;
(c) Patient scheduling;
(d) The dental supplies and lab used by the Practice;
(e) Marketing and placement of advertising; and
(f) Any other aspects of the Practice's operations that are
considered to be within the practice of
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dentistry under applicable state dental laws and regulations.
3.4 HOURS OF OPERATION. The PC represents and agrees that it will be
open to the public on a full time schedule of eight hours per day, a minimum of
five days per week (except for reasonable holidays), with appropriate staffing
by Dentists, hygienists and assistants, throughout the term of this Agreement.
3.5 PATIENT RECORDS. The PC will prepare and maintain at the Practice
accurate, complete and timely records on all services rendered to patients at
the Practice. All patient records shall be the property and remain under the
control and custody of the PC at all times during and after the term of this
Agreement. The records shall be prepared and maintained in compliance with all
applicable state and federal laws and regulations. DCA shall have access to the
patient records of the PC only for the limited purposes necessary to perform its
duties under this Agreement, and subject to all applicable laws and regulations
governing the confidentiality of such records.
3.6 AGREEMENT NOT TO ENCUMBER OR ALLOW TO BE ENCUMBERED. PC and
Stockholder agree that as part of the inducement to DCA to enter into this
transaction, and related transactions, including but not necessarily limited to
loans, guaranty of loans, or leases, or license agreements, DCA has considered
and relied upon the creditworthiness and reliability of PC and Stockholder.
PC and Stockholder covenant and agree not to sell, convey, transfer,
all or substantially all assets of the PC without DCA's prior written consent.
IV. FINANCIAL ARRANGEMENTS
4.1 PRACTICE OPERATING EXPENSES. DCA will be responsible for paying for
the Practice's operating expenses from the funds paid to DCA as Service Fees (as
defined below), which shall include the expenses incurred by DCA in connection
with the performance of those services discussed in ARTICLE II and EXHIBIT E of
this Agreement (the "Practice Expenses"), provided that the PCs shall pay DCA
its monthly service fee and if such service fee shall not be sufficient to cover
Practice Expenses, PCs shall be responsible for any overage paid by DCA.
4.2 EXPENSES OF THE PC. The PC will be responsible for payment of the
salary and benefits and professional liability insurance for the Dentists (the
"Dentist Expenses") and any other Practice dental professionals employed
directly by the PCs and any other expenses of the Practice or the PCs that are
not included within the definition of Practice Expenses.
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Disbursements for such expenses shall be made by DCA from the PCs designated
account in accordance with SECTION 2.4 of this Agreement.
4.3 SERVICE FEE. Each month DCA will deduct from the PCs designated
account, with the prior written approval of the PCs, such approval shall not be
unreasonably withheld and timely made, a service fee payable by the PCs to DCA
(each a "Service Fee") which shall be determined as set forth in EXHIBIT "F"
where Service Fee and net collected revenues are defined.
4.4 LOANS. If requested by the PC, DCA may, but is not obligated to,
provide loans to the PC to fund the PC's working capital requirements. Such
loans, if any, will accrue interest at the current borrowing rate of DCA.
V. INSURANCE AND INDEMNITY
5.1_ INSURANCE TO BE MAINTAINED BY THE PC. The PC covenants and agrees
that throughout the term of this Agreement, it will maintain comprehensive
professional liability insurance with limits of not less than $300,000 per claim
and with aggregate policy limits of not less than $1,000,000.00 per each
Dentist, with the PC and DCA being an additional insured. The PC shall be
responsible for all such liabilities in excess of the limits of such policies.
DCA agrees to negotiate for and cause premiums to be paid with respect to such
insurance. Premiums and deductibles with respect to such policies shall be a
Practice Expense of the PC.
5.2 INSURANCE TO BE MAINTAINED BY DCA. DCA agrees that throughout the
term of this Agreement, it will maintain property and casualty insurance on the
property described on EXHIBIT "A", with premiums and deductibles with respect to
such policies being a Practice Expense.
5.3 ADDITIONAL INSUREDS. The PCs agree to use reasonable efforts to
have DCA named as an additional insured on its professional liability insurance
program.
5.4 INDEMNIFICATION. The PC shall indemnify, hold harmless and defend
DCA and its officers, directors, shareholders and employees, from and against
any and all liability, loss, damage, claim, causes of action, and expenses
(including reasonable attorney's fees), whether or not covered by insurance,
caused or asserted to have been caused, directly or indirectly, by or as a
result of the performance of medical or dental services or the performance of
any intentional acts, negligent acts or omissions by the PC and/or the
Stockholder or P.C.'s agents, employees and/or subcontractors (other than DCA)
during the term hereof.
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DCA shall indemnify, hold harmless and defend the PC and its or their employees,
from and against any and all liability, loss, damage, claim, causes of action,
and expenses (including reasonable attorney's fees), caused or asserted to have
been caused, directly by or indirectly as a result of intentional acts,
negligent acts or omissions by DCA and/or its shareholders, agents, employees
and/or subcontractors (other than the PC and/or Stockholder), in connection with
the services provided or required to be provided by DCA, during the term of this
Agreement.
VI. TERM AND TERMINATION
6.1 TERM OF AGREEMENT. This Agreement shall have a term of eight years
(8) years beginning on May 1, 1997 and ending April 30, 2005.
6.2 TERMINATION OF AGREEMENT. This Agreement may be terminated as
provided for in this Section, it being expressly agreed that termination of this
Agreement by any party shall serve to terminate the Agreement against all
parties.
(a) TERMINATION FOR CAUSE. In the event that DCA, on one hand, or
the PCs, on the other hand, shall materially default in the
performance of any obligation imposed upon it, them or him
by, or made by it, them or him pursuant to this Agreement or
the Promissory Note issued by DCA to Ross Management Company
in connection herewith and such default shall continue for a
period of 30 days' after written notice thereof has been
given to the defaulting party by the non-defaulting party,
the non-defaulting party may terminate this Agreement
immediately upon written notice to the defaulting party
otherwise P.C. acknowledges that this Agreement is
non-cancelable and non-terminable except as provided in (b)
and (c). In the event Stockholder loses his license to
practice dentistry, either by revocation, termination or
suspension, same shall be deemed a material default. It is
expressly agreed by DCA that a material default of this
Agreement by DCA (excluding defaults caused by any of its
subcontractors) shall be deemed to be a default of the
promissory note. A copy of the License Agreement between the
parties is attached hereto as EXHIBIT "G". -----------
(b) TERMINATION BY REASON OF INSOLVENCY. In the event of the
filing of a petition in bankruptcy pursuant
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to Chapter 7 of the federal bankruptcy laws or an assignment
for the benefit of creditors by either DCA, on one hand, or
the PCs or the Stockholder on the other hand, or upon other
action taken or suffered, voluntarily or involuntarily, under
any federal or state law for the benefit of debtors by such
party, except for the filing of a petition in involuntary
bankruptcy against a party which is dismissed within thirty
(30) days thereafter, the non-defaulting party may give
written notice of the immediate termination of this
Agreement.
(c) TERMINATION FOR OTHER REASONS. In the event that the
Administrative Service Subcontract Agreement dated July __,
1997 between DCA and Johnson Dental Development Corporation
is terminated for any reason whatsoever then this Agreement
shall automatically and forever terminate in all respects
without any further action being required of any party. In
addition, if any action is taken by the secured party under
that certain Security Agreement dated September 1, 1993
between Steven Matzkin and David Ross Johnson to exercise or
enforce any provision or right thereunder, then this
Agreement shall automatically and forever terminate with
respect to Gratiot Avenue Dental, P.C. in all respects
without any further action being required of any party.
6.3 ACTIONS UPON TERMINATION OF THIS AGREEMENT.
(a) Upon termination or expiration of this Agreement for any
reason:
(i) The PCs shall promptly return all DCA Proprietary
Information to DCA and otherwise comply with the
covenants and agreements of SECTION 7.1. AND 7.3,
hereof;
(ii) DCA shall return all PC Proprietary Information to the
PCs, and otherwise comply with the covenants and
agreements of SECTION 7.2. 7.3 AND 7.4 AND 7.6 hereof;
(iii) the PCs and Stockholder shall promptly repay DCA all
advances, loans and other amounts due hereunder and any
interest due thereon, and assume all debt and all
contracts and payables authorized by this Agreement to
be incurred by DCA and which
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relate to the performance of DCA's obligations under
this Agreement; and
(iv) DCA shall render a final accounting for monies
deposited in, and disbursed from, the PCs designated
account.
(b) It is expressly agreed by the parties that the obligations of
this SECTION 6.3 shall survive the termination or expiration
of this Agreement.
VII. CONFIDENTIALITY AGREEMENTS
7.1 CONFIDENTIALITY AGREEMENT OF THE PC AND THE STOCKHOLDER. The PC and
the Stockholder jointly and severally acknowledge and agree that all business
information and materials provided to them by DCA pursuant to this Agreement
shall be considered the property of DCA ("DCA Proprietary Information"), and
further agree that they shall not rent, sell, give away or otherwise utilize DCA
Proprietary Information in any business activity or for any business purpose
other than as required to fulfill their obligations under this Agreement. The PC
and the Stockholder jointly and severally agree, and shall cause their
employees, agents and shareholders to agree, that DCA Proprietary Information
shall be kept confidential and, unless otherwise required by law, regulation or
valid court order, shall not be disclosed to any person except as authorized by
DCA in writing. Upon termination of this Agreement, the PC and the Stockholder
jointly and severally agree that they shall promptly return to DCA all DCA
Proprietary Information then in their possession or control.
7.2 CONFIDENTIALITY AGREEMENT OF DCA. DCA acknowledges and agrees that
all business information and materials provided or made available to it by the
PC and the Stockholder pursuant to this Agreement shall be considered the
property of the PC and the Stockholder ("PC Proprietary Information"), and
further agrees that it shall not rent, sell, give away or otherwise utilize PC
Proprietary Information in any business activity or for any business purpose
other than as required to fulfill its obligations under this Agreement. DCA
further agrees, and shall cause its employees, agents and shareholders to agree,
the PC Proprietary Information shall be kept confidential and, unless otherwise
required by law, regulation or valid court order, shall not be disclosed to any
person except as authorized by the PC in writing. Upon termination of this
Agreement, DCA agrees that it shall promptly return to the PC all PC Proprietary
Information then in its possession or control.
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7.3 TRADE SECRETS COVENANT. During the term of this Agreement and for
an additional five (5) year period from the termination of the same, the parties
agree that they will not disclose to any person or entity, any trade secrets of
the other including, but not limited to, manuals, operating systems, reporting
systems, training systems of the other that such party has become privy to or
has used during their involvement with the other. This covenant shall be
construed as an agreement.
7.4 NONSOLICITATION AGREEMENT. The parties agree that neither them nor
their affiliates shall during or at any time after termination or expiration of
this Agreement solicit any employees of the other to leave employment of the
party or become employed by it or any entity with which it is directly or
indirectly related. The parties agree that during this agreement and for one
year subsequent to the proper termination or expiration hereof, they will not
solicit any customers, clients, patients, vendors, contractors, employees,
independent contractors, buyers, distributors or manufacturers to cease doing
business with the other party, or to do business with them or any entity,
business, corporation or partnership with which any of them is either directly
or indirectly related.
7.5 RETURN OF DCA DOCUMENT. Information or Products. PC and Stockholder
agree that upon termination or expiration of this Agreement with DCA for any
reason, they shall immediately, but no longer than ten (10) business days from
such termination, return to DCA all documents or information in any form or
medium owned, produced or developed by DCA.
7.6 RETURN OF PCS DOCUMENTS, INFORMATION OR PRODUCTS. DCA agrees that
upon termination or expiration of this Agreement with the PCs for any reason,
DCA shall immediately, but no longer than ten (10) business days from such
termination, return to PC all documents or information in any form or medium
owned, produced or developed by PC.
VIII. INDEPENDENT CONTRACTORS
8.1 INDEPENDENT RELATIONSHIP. DCA intends to act and perform as an
independent contractor of the PC, and the provisions hereof are not intended to
create any partnership, joint venture, agency or employment relationship between
the parties. The PC, the Stockholder and the Dentists will not have any claim
under this Agreement, or otherwise, against DCA for vacation pay, sick leave,
unemployment insurance, worker's compensation, disability benefits or employee
or any other employment related benefits of any nature or kind.
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IX. GENERAL PROVISIONS
9.1 ASSIGNMENT. DCA and the PCS shall not have the right to assign,
subcontract or sell their respective rights and obligations hereunder to any
person, corporation, partnership or other legal entity without prior written
consent of the other, which consent shall not unreasonably be withheld. Subject
to this provision, this Agreement shall be binding upon the parties hereto, and
their successors and assigns.
9.2 WHOLE AGREEMENT; MODIFICATION. There are no other agreements or
understandings, written or oral, between the parties regarding this Agreement
and the Exhibits, other than as set forth herein. This Agreement shall not be
modified or amended except by a written document executed by all parties to this
Agreement.
9.3 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by facsimile transmission (with written confirmation of receipt), provided
that a copy is mailed by certified mail, return receipt requested, or (c) when
received by the addressee, if sent by a nationally recognized overnight delivery
service (receipt requested), in each case to the appropriate addresses and
facsimile numbers set forth below (or to such other addresses and facsimile
numbers as a party may designate by written notice to the other parties with
such written notice to be given as set forth in this section).
To PC: c/o David Ross Johnson, D.D.S.
3872 Vista Lane
Orchard Lake, MI 48323
And to Stockholder: David Ross Johnson, D.D.S.
3872 Vista Lane
Orchard Lake, MI 48323
To DCA: Dental Care Alliance, Inc.
1343 Main Street, 7th Floor
Sarasota, Florida 34236
Facsimile No: (941) 366-9615
Attention: Dr. Steven Matzkin
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With a copy to: Abel, Band, Russell, Collier, Pitchford
and Gordon Chartered
P. O. Box 49948
Sarasota, FL 34230
Facsimile No: (941) 366-3999
Attention: Michael S. Taaffe, Esquire
9.4 WAIVER OF PROVISIONS. Any waiver of any 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.
9.5 GOVERNING LAW. The validity, interpretation and performance of this
Agreement shall be governed by and construed in accordance with the laws of the
State of Florida.
9.6 EVENTS EXCUSING PERFORMANCE. Neither party shall be liable to the
other party for failure to perform any of the services required herein in the
event of strikes, lock-outs, acts of God, unavailability of supplies or other
events over which that party has no control for so long as such events continue,
and for a reasonable period of time thereafter.
9.7 COMPLIANCE WITH APPLICABLE LAWS. All parties shall comply with all
applicable federal, state and local laws, regulations and restrictions in the
conduct of their obligations under this Agreement.
9.8 SEVERABILITY. The provisions of this Agreement shall be deemed
severally and if any portion shall be held invalid, illegal or unenforceable for
any reason, the remainder of this Agreement shall be effective and binding upon
the parties.
9.9 ADDITIONAL DOCUMENTS. Each of the parties hereto agrees to execute
any document or documents that may be requested from time to time by any other
party to implement or complete such party's obligations pursuant to this
Agreement.
9.10 ATTORNEYS' FEES. If legal action is commenced by any party to
enforce or defend its rights under this Agreement, the prevailing party in such
action shall be entitled to recover its costs and reasonable attorneys' fees in
addition to any other relief granted.
9.11 CONTRACT MODIFICATIONS FOR PROSPECTIVE LEGAL EVENTS. In the event
any state or federal laws or regulations, now existing or enacted or promulgated
after the effective date of this Agreement, are interpreted by judicial
decision, a regulatory
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agency or legal counsel for both parties in such a manner as to indicate that
the structure of this Agreement may be in violation of such laws or regulations,
the PC, Stockholder and DCA shall amend this Agreement as necessary to the
maximum extent possible, any such amendment shall preserve the underlying
economic and financial arrangements between the PC, Stockholder and the DCA.
9.12 REMEDIES CUMULATIVE. No remedy set forth in this Agreement or
otherwise conferred upon or reserved to any party by law shall be considered
exclusive of any other remedy available to any party, but the same shall be
distinct, separate and cumulative and may be exercised from time to time as
often as occasion may arise or as may be deemed expedient.
9.13 LANGUAGE CONSTRUCTION. The language in all parts of this Agreement
shall be construed, in all cases, according to parties acknowledgment that each
party and its counsel have reviewed and revised this Agreement and that the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of this Agreement.
9.14 NO OBLIGATION TO THIRD PARTIES. None of the obligations and duties
of any party under this Agreement shall in any way or in any manner be deemed to
create any obligation to, or any rights in, any person or entity not a party to
this Agreement.
9.15 ENTIRE AGREEMENT/AMENDMENTS. This Agreement supersedes all
previous contracts and agreements between the parties respecting the subject
matter of this Agreement. As between or among the parties, no oral statement or
prior written material not specifically incorporated herein shall be of any
force and effect. This Agreement may be executed in two or more counterparts,
each and all of which shall be deemed an original and all of which together
shall constitute but one and the same instrument and shall not be amended,
altered or changed except by a written amendment signed by the parties hereto.
9.16 GRATIOT AVENUE DENTAL, P.C. SPECIAL CONDITIONS. If Steven R.
Matzkin or assigns exercise rights of possession under such Agreement dated
September 1, 1993 regarding related practices owned by David Ross Johnson, then
this Agreement shall terminate as of such event.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
PC:
-------------------------------------
By:
----------------------------------
Signature
----------------------------------
Printed Name
PRESIDENT
-----------------------------------
Title
DCA:
DENTAL CARE ALLIANCE, INC., A Delaware
Corporation
By:
-----------------------------------
Signature
STEVE MATZKIN
-----------------------------------
Printed Name
PRESIDENT
-----------------------------------
Title
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EXHIBIT A
PRACTICE LOCATIONS
Eight Mile Dental, P.C.
Gratiot Avenue Dental, P.C.
Wayne Road Dental, P.C.
Washington Boulevard Dental, P.C.
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EXHIBIT B
BUSINESS AND ADMINISTRATIVE SERVICES PROVIDED BY DCA
DCA shall be responsible for providing all business and administrative
services required for the routine day-to-day operations of the Practice'
operations, only as follows; and otherwise as deemed reasonably necessary by
DCA, or in the sole discretion of DCA as may be reasonably requested by PCs.
(a) Payroll administration and accounting.
(b) Consulting advice on staff salaries, benefits and performance and incentive
plans.
(c) Recruitment of additional dentists.
(d) Facilitating the ordering of supplies.
(e) Bookkeeping and accounting. Preparation of monthly financial statements
providing true, correct and complete copies thereto to PC each month, as
and when same are completed.
(f) Processing and distribution of all checks, including but not limited to,
payroll, payables, taxes and rents, and provision of copies of all bank
statements to PC on a monthly basis promptly after the same are received by
DCA.
(g) Provision of business forms, and provision of consulting advice on business
procedures any systems.
(h) Establishment of administrative controls to assure against theft.
(i) Billing and collections supervision.
(j) Marketing and advertising supervision.
(k) Installation of computer hardware and software. Training of staff in
utilization.
(l) Preparation of statistical data and analysis of office operations.
(m) Provision of consulting advice on improving office efficiency.
(n) Provision of consulting advise on office location and layouts.
(o) Negotiation of office leases.
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(p) Legal services for the Practice's routine operations (not including
professional liability or malpractice defense).
(q) Solicitation of and assistance in negotiations of managed care contracts.
(r) Consulting services and advice (as requested) on office efficiency and
productivity.
(s) On behalf of the PC, and with the PC's funds (there is no independent
obligation of DCA to anyone to make any payments except to the extent of
the availability of PC funds) payment of all accounts and notes payable as
and when the same become due and payable in accordance with their
respective terms.
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EXHIBIT C
SUBLEASE
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EXHIBIT D
EMPLOYMENT AGREEMENT
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EXHIBIT E
PRACTICE EXPENSES
(Headings and groupings below are for informational purposes and are subject to
changed based on accounting purposes)
The following expenses solely and directly related to the operation of
the PCs:
COST OF SALES
Dental Supplies
Implant Supplies
Lab Expense-Internal
Lab Expense-External
Material
Contract Dentists
Hygiene Wages
Lab Tech Wages
OPERATING EXPENSES, COMPENSATION & BENEFITS, SALARIES & WAGES
Officer Wages
Dental Assistant Wages
Administrative Wages
Bonuses
PAYROLL TAXES
FICA Tax Expense
Medicare Tax Expense
FUTA Tax Expense
SUTA Tax Expense
BENEFITS
Health Insurance
Continuing Education
FACILITIES
Rent Office
Rent-other
Telephone
Pest Control
Cleaning Service
Utilities
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REPAIRS & MAINTENANCE
Dental Equipment
Computer Equipment
Building
Office Equipment
ADVERTISING
Television
Newspaper
Yellow Pages
Magazines
Direct Mail
Seminars
OUTSIDE SERVICES
Accounting Services
Payroll Services
Auditing Services
Legal Services
Temporary Help
Misc. Outside Services
LEASE EXPENSE
Dental Equipment Lease
Telephone Lease
Computer Lease
Office Equipment Lease
INSURANCE
Workers Compensation Insurance
Liability Insurance
Malpractice Insurance
Misc. Insurance
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GENERAL OFFICE EXPENSES
Administrative Support
Vehicle Expense
Computer Expense
Contributions & Donations
Dues & Subscriptions
Office Expenses
Small Equipment
Tools
Operating Supplies
Uniforms
Postage & Freight
MISCELLANEOUS EXPENSES
Bank Charges
Cash Over/Short
Check Guarantee Fees
Credit Card Charges
License, Fees & Permits
Taxes-Other
Property Taxes
Sales Taxes
State Taxes
Reimbursement Expenses
DCA Licensing Fees
Other Misc. Expenses
Indemnification of Officers, Directors and the Stockholders of the PCs
from claims of third party excluding Steve Matzkin, Profit Dental
Management, Inc., D.C.A., their assigns, or related entities.
PRINCIPAL & INTEREST EXPENSE
Notes associated with practice
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EXHIBIT F
DEFINITION OF NET COLLECTED REVENUE
Net collected revenue shall be defined as:
Total collected revenue on a cash basis minus any patient refunds.
Service Fee: 74% of Net Collected Revenue
The parties acknowledge and agree that to the extent that the Service
Fee hereunder results in the PCs' inability to discharge their respective
payment obligations, including but not limited to, paying the salaries and
payroll costs of all their employed and contracted dentists, dental hygienists
and other employees and payment of insurance premiums and other costs and
expenses that are the responsibility of the PCs pursuant to the provisions of
this Agreement or would render any of them insolvent during the term of this
Agreement, the amount of the Service Fee shall be mutually adjusted by the
parties acting reasonably and in good faith to reasonably permit the PCs to
retain sufficient funds to discharge such obligations.
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EXHIBIT G
LICENSE AGREEMENT
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EXHIBIT 10.7
LICENSE AGREEMENT
This License Agreement (this "Agreement") is entered into this 1st day
of May 1997, by and between Dental Care Alliance, Inc., a Delaware corporation,
with its principal place of business located at 1343 Main Street, 7th Floor,
Sarasota, Florida 34236 ("DCA"), and EIGHT MILE DENTAL, P.C., a Michigan
professional dental corporation located at 511 West Eight Mile Road, Detroit, MI
48324 ("Licensee").
RECITALS
A. As a result of time, effort, experience and the expenditure of
money, DCA has acquired unique and special skills, technique and knowledge
concerning the ownership, management and operation of dental service offices.
B. DCA has devised a unique and uniform network of entities (the
"Network"), to the members of which DCA offers a particular package of services,
including, without limitation, marketing and promotional services, discounted
products and supplies, the right to identify a dental service office in
connection with the Licensed Marks (as defined in Section 9 hereof, and other
services related to the operation of a dental service office.
C. DCA has the right to offer to others a license to use the Licensed
Marks in connection with the operation of a dental service office and to operate
as a member of the network.
D. Licensee desires to avail himself or itself to the benefits of using
the Licensed Marks and participating in the Network, subject to and in
accordance with the covenants, terms and conditions of this Agreement and any
and all other documents, agreements, schedules and exhibits executed in
connection herewith.
E. The Parties acknowledge executing simultaneously herewith a Dental
Care Alliance Inc. Administrative Service Agreement.
F. DCA desires to grant to Licensee a license for the right to identify
the Dental Office (as hereinafter defined) as a member of the Network and to use
one or more of the Licensed Marks in connection therewith.
NOW, THEREFORE, in consideration of the full and faithful performance
hereafter by Licensee of all the covenants, terms and conditions herein
contained to be performed by Licensee, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. INCORPORATION OF RECITALS.
The Recitals are hereby incorporated into this Agreement as if set
forth more fully herein.
<PAGE>
2. GRANT OF LICENSE.
DCA hereby grants to Licensee, for a period commencing upon the date of
execution of this Agreement and expiring seven (7) years from the date hereof
(the "Original Term"), unless otherwise terminated prior thereto or extended
thereafter in accordance with the terms set forth herein, a license (the
"License") for the right:
(a) To identify the dental service office at 511 West Eight
Mile Road, Detroit, MI 48324 (the "Dental Office") as a member of the
Network and to use one or more of the Licensed Marks in connection
therewith; and
(b) For the original Term of this Agreement, unless
otherwise terminated prior thereto or extended thereafter in accordance
with the terms set forth herein, the foregoing right and license shall
be exclusive to Licensee for the Territory identified as follows:
Area defined by a five (5) mile radius from the location of
the Dental Office (the "Exclusive Territory"). This grant,
however, does not give Licensee any exclusive rights nor
impose upon DCA any obligations with respect to any other
business, licensed or otherwise, engaged in by DCA either
directly or through any other entity. Without limiting the
application of the preceding sentence, DCA specifically
retains the right, in its sole discretion, and without
granting any rights to Licensee in connection therewith, to
operate and grant other licenses for the operation of Network
Dental Offices outside of the Exclusive Territory as DCA, in
its sole discretion, deems appropriate.
3. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT.
As a condition to the effectiveness of this Agreement, Licensee shall
upon the execution of this Agreement, shall deliver to DCA appropriate
documentation evidencing the authority of the individual executing this
Agreement on behalf of Licensee.
4. PAYMENT OBLIGATIONS OF LICENSEE.
In consideration of the License herein granted and the other services
made available by DCA to Licensee hereunder, Licensee hereby agrees and consents
as follows:
Licensee shall pay to DCA, for each month during the Original
Term unless earlier terminated in accordance with the
provisions herein, a monthly license fee (the "License Fee")
in the amount of Eight Hundred Dollars ($800.00), to be paid
on or before the tenth (10th) day of each calendar month for
the immediately preceding calendar month. For any renewal
terms of this Agreement, the License Fee shall be the License
Fee charged by DCA under DCA's then current form of License
Agreement. All License Fee payments shall be deemed earned by
DCA upon receipt and shall not be refundable under any
circumstances.
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5. OTHER OBLIGATIONS OF LICENSEE.
5.1 INSURANCE. Licensee shall maintain, during the Original Term of the
License and any renewal terms thereof at Licensee's own expense (i) dental
malpractice liability insurance against claims for bodily and personal injury,
death and property damage caused or incurred in connection with its operation or
conduct of the Dental Office, (ii) general casualty insurance on the Dental
Office's building, equipment, signs and inventory, (iii) motor vehicle liability
insurance, to the extent applicable, and (iv) any other insurance as may be
required under applicable federal, state and local law. Such insurance policies
must name DCA as an additional insured, must be issued by insurance companies
reasonably acceptable to DCA, provided, however, that in no event shall such
insurance policies provide coverage in an amount less than One Hundred Thousand
Dollars ($100,000) per occurrence and Three Hundred Thousand Dollars ($300,000)
annual aggregate. Each such insurance policy shall also require that the
applicable insurance carrier provide DCA with at least thirty (30) calendar
days' written notice prior to any cancellation, modification or nonrenewal of
such insurance policy.
Licensee agrees to provide to DCA, promptly upon issuance thereof
evidence of the foregoing insurance with certificates of insurance naming DCA as
an additional insured. Licensee shall provide copies of all renewal policies to
DCA within ten (10) calendar days of Licensee's receipt thereof. In the event
that Licensee does not maintain the above-described insurance, allows it to
lapse, or fails to furnish DCA with satisfactory evidence thereof DCA may, but
shall not be obligated to, obtain such insurance as it deems, in its sole and
absolute discretion, to be necessary and to charge Licensee for all costs in
connection therewith. The failure of Licensee to reimburse DCA for obtaining
such coverage within ten (10) calendar days after delivery of notice thereof to
Licensee shall constitute grounds for termination under this Agreement.
5.2 SIGNAGE. In the event Licensee's Dental Office is identified with
free-standing outdoor signage, Licensee may, but shall not be required to,
display one or more of the Licensed Marks on the facing of such signage in a
reasonably appropriate manner, PROVIDED, HOWEVER, that in no event shall more
than twenty percent (20%) of the facing of any such signage be comprised of one
or more Licensed Marks or otherwise be used to identify the Dental Office's
affiliation with the Network. Notwithstanding anything contained herein to the
contrary, Licensee shall not be required to have or obtain any free-standing
outdoor signage in connection with the Dental Office.
5.3 WARRANTY PROGRAM. Licensee acknowledges that DCA requires each and
every member of the Network to extend a five (5) year limited warranty (the "DCA
Warranty") to the patients of their respective Dental Offices. In particular,
the DCA Warranty requires Licensee to guarantee, for a period of five (5) years,
all material and workmanship on all fillings, dentures, partials, bridges and
crowns provided at any Dental Office and paid for in full by the patient.
Subject to certain exceptions to be determined by DCA from time to time in its
sole discretion the DCA Warranty requires the Licensee to repair or replace the
defective product at no extra charge to the patient. Accordingly, by executing
this Agreement, Licensee hereby agrees to
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honor the DCA Warranty and to perform services to patients of the Network in
full compliance therewith. Licensee further agrees that DCA shall be entitled,
from time to time hereafter subject to the approval of Licensee, not to be
unreasonably withheld; to amend the DCA Warranty or to adopt additional warranty
policies.
5.4 COMPLIANCE WITH LAWS. Licensee must at all times during the
Original Term of the License and any renewal terms thereof comply in all
material respects with any and all applicable federal, state and local laws,
regulations and codes of ethics in the operation of, and in the provision of
services at, the Dental Office, including without limitation, the Occupational
Safety and Health Act, as amended ("OSHA"), and any and all minimum quality and
reporting standards adopted from time to time by any applicable state or federal
Board of Dentistry, the Department of Labor or other similar governmental
agency.
6. REPRESENTATIONS AND WARRANTIES.
Licensee represents and warrants to DCA that, for so long as this
Agreement is in effect, unless it determines to discontinue the operation of the
dental office, it will maintain its existence in good standing as a sole
proprietorship, corporation, partnership or other entity, as applicable.
7. LICENSED MARKS.
Subject to the provisions of this Agreement, DCA hereby grants to
Licensee the right and license to use one or more of DCA's trademarks, service
marks, trade names, logotypes and commercial symbols (collectively, the
"Licensed Marks") in connection with the Dental Office. Notwithstanding the
foregoing, Licensee shall only display or otherwise use the Licensed Marks in
the manner or manners approved or designated by DCA in writing. Each such
display or use of one or more of the Licensed Marks shall clearly identify
Licensee as a licensee of such Licensed Marks, and not the owner or licensor
thereof.
Nothing contained herein gives Licensee any interest in or to any of
the Licensed Marks or any component thereof, nor the goodwill now or hereafter
attached thereto, except for the right to use such Licensed Marks as authorized
by DCA, pursuant to and for the term of this Agreement, solely in connection
with the operation of Licensee's Dental Office. Licensee shall not use the
Licensed Marks as part of any other corporate or trade name or with any prefix,
suffix or other modifying words, terms, designs or symbols, or in any modified
form, nor may Licensee use any Licensed Mark in connection with sale of any
unauthorized product or serve or in any other manner not expressly authorized in
writing by DCA.
Licensee shall not engage in or permit any act calculated to
prejudice, affect, impair or destroy the title or interest of DCA in and to any
of the Licensed Marks or any related or similar name. In addition, Licensee
shall immediately notify DCA of any apparent infringement of one or more of the
Licensed Marks by any third party or any challenge to Licensee's use of any of
the Licensed Marks.
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In such instance, Licensee shall not communicate with any person other
than DCA and Licensee's counsel with respect to such infringement or challenge.
In addition, Licensee shall cooperate fully with DCA in defense and protection
of the Licensed Marks in question.
Notwithstanding the foregoing, DCA shall have sole discretion to take
such action as it deems appropriate and to exclusively control any litigation or
administrative proceedings arising out of any infringement, challenge or claim
regarding any one or more of the Licensed Marks. Licensee agrees to execute any
and all instruments and documents, render such assistance and do such acts and
things as may, in the opinion of DCA's counsel, be necessary or advisable to
protect and maintain the interests of DCA in any such proceeding or to otherwise
protect and maintain the interests of DCA in and to the Licensed Marks. Except
as specifically provided herein, DCA shall not otherwise be obligated to protect
or defend any of the Licensed Marks in any litigation or administrative
proceeding arising out of any infringement, challenge or claim if it elects not
to do so in its sole discretion.
If for any reason DCA or Licensee is ultimately prohibited from using
any one or more of the Licensed Marks, Licensee shall not be entitled to any
compensation therefor, nor shall compensation be paid by DCA to Licensee as a
result thereof. Further, Licensee may, immediately upon the request of DCA, be
required to modify or discontinue the use of one or more of the Licensed Marks,
or to use one or more additional or substitute trademarks, service marks, trade
names, logotypes or other commercial symbols in lieu of one or more of the
Licensed Marks, in connection with the Dental Office.
8. NO EMPLOYMENT INTENDED.
Nothing herein contained shall in any way be construed as constituting
Licensee, its Dentist in charge or any other employee or representative of
Licensee as an employee, agent, partner, subsidiary or joint venturer of DCA.
Licensee shall perform hereunder as an independent contractor at its sole
expense and risk and shall advertise this fact to the public, and assumes full
responsibility and liability for, and agrees to hold DCA harmless from any
claims, suits, actions, losses, expenses, injury or damage, including, but not
limited to, attorneys' fees and other expenses incident thereto, incurred at any
time by DCA as a result of Licensee's activities in operating the Dental Office
or arising out of this Agreement.
NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, DCA IS NOT,
AND SHALL NOT BE DEEMED TO BE, PROVIDING TO LICENSEE, OR TO ANY OF MEMBERS OF
LICENSEE'S STAFF, ANY TRAINING, ADVICE OR CONSOLATION IN, NOR PRESCRIBING ANY
STANDARDS OR GUIDELINES PERTAINING TO, THE PROVISION OF DENTAL OR OTHER MEDICAL
CARE TO THE PATIENTS OF LICENSEE. CONSEQUENTLY, IN NO EVENT SHALL DCA IN ANY WAY
BE HELD LIABLE TO ANY THIRD PARTY FOR OR AS A RESULT OF THE PROVISION OF DENTAL
OR OTHER MEDICAL CARE BY LICENSEE OR BY ANY MEMBERS OF LICENSEE'S STAFF.
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9. LICENSED TERM.
The term of the License commences on the date of execution of this
Agreement and expires eight (8) years from the date hereof; provided, however,
that this Agreement shall automatically terminate immediately upon any
termination of the Administrative Services Agreement dated as of the same date
hereof between DCA, Licensee and certain other parties.
10. TERMINATION BY LICENSEE.
10.1 TERMINATION WITH CAUSE.
If Licensee is in compliance with this Agreement and DCA breaches this
Agreement, Licensee shall specify the breach with particularity to DCA in
writing and shall give DCA thirty (30) calendar days' written notice within
which to cure such breach. If DCA fails to cure such breach within said time
period, Licensee may terminate the License for cause. Such termination shall not
be effective until ten (10) calendar days after Licensee's delivery to DCA of a
subsequent written notice of termination and the payment to DCA of all
outstanding amounts due under this Agreement accrued through the date thereof. A
termination of the License by Licensee for any reason other than an uncured
breach of this Agreement by DCA or pursuant to Section 9 above shall be deemed a
termination by Licensee without cause. In the event that Licensee attempts to
terminate the License without cause, such act shall constitute a breach hereof
by Licensee, and DCA shall have the right to invoke any and all remedies
available to DCA hereunder as a result thereof. A termination of the License by
Licensee for any reason shall also invoke such other post-termination
obligations of Licensee as are set forth in Section 14 of this Agreement. At all
other times during the term of the License, Licensee shall not be entitled to
terminate the License except as provided in Sections 10.1 and 28.
11. TERMINATION BY DCA.
DCA shall have the right to terminate the License, effective
immediately upon delivery of written notice to Licensee, if:
(a) Licensee suffers cancellation of, or fails to renew or
extend, the lease or sublease for the premises of the Dental Office and
fails to find a suitable alternative location for the Dental Office
within the Exclusive Territory and otherwise acceptable to DCA within
thirty (30) calendar days after the lease expires or is terminated.
(b) Licensee or the Dentist in charge, as applicable,
abandons, surrenders, transfers control of, fails to actively operate
at, or loses the right to occupy or transact business on, the premises
of the Dental Office for a period of thirty (30) consecutive calendar
days.
(c) Licensee becomes insolvent, makes a general assignment
for the benefit of creditors, suffers the filing of a voluntary or
involuntary bankruptcy petition that is not dismissed within thirty
(30) calendar days after filing, is adjudicated bankrupt, suffers
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temporary or permanent courtappointed receivership of substantially all
of its property, if an execution is levied against Licensee's business
or property, if suit to foreclose any lien or mortgage against the
premises or equipment of the Dental Office is instituted against
Licensee and is not dismissed within thirty (30) calendar days
thereafter, or if the real or personal property of the Dental Office is
sold after levy thereupon by any sheriff, marshal! or constable.
(d) Licensee or the Dentist in Charge, as applicable, is
convicted of or pleads no contest to a felony or is convicted of or
pleads no contest to any crime or offense that, among other things,
involves moral turpitude or consumer fraud or is likely to adversely
affect the reputation of the Dental Office, the Network, DCA, or the
goodwill associated with the Licensed Marks.
(e) Licensee or the Dentist in Charge, as applicable,
commits any violation of any applicable federal, state or local health,
safety, sanitation or other similar law, rule, regulation, ordinance,
standard, policy or practice in the operation, or otherwise operates
the Dental Office in a manner that presents a health or safety hazard
to its employees, patients or the general public, and fails to cure
such violation or condition within thirty (30) days of the occurrence
thereof, to the extent curable.
(f) Licensee or the Dentist in Charge, as applicable, has
his or her license to practice dentistry in any state involuntarily
suspended or revoked for any reason, or fails to immediately discharge
any dentist employed at the Dental Office whose license to practice in
any state is involuntarily suspended or revoked.
(g) Licensee or the Dentist in Charge, as applicable,
employs any person to practice dentistry at the Dental Office who is
not licensed to practice dentistry in the state in which the Dental
Office is located.
(h) Licensee or the Dentist in Charge, as applicable, fails,
in the opinion of DCA with regard to applicable federal, state and
local laws, regulations and ordinances, to construct, maintain or
operate the Dental Office in a safe manner.
(i) Licensee, the Dentist in Charge or any other employee or
representative of Licensee discloses or divulges any trade secrets or
other confidential information provided by DCA to Licensee, the Dentist
in Charge or such employee or representative of Licensee, or otherwise
transfers any proprietary information of DCA.
(j) Upon the death or permanent incapacity, as applicable,
of the Licensee who is the Dentist in Charge, the executor,
administrator, conservator or other personal representative of Licensee
fails to appoint a competent replacement Dentist in Charge acceptable
to DCA in its sole discretion within a reasonable time not to exceed
thirty (30) calendar days from the date of death or permanent
disability.
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(k) Upon the resignation, death or permanent incapacity of
the Dentist in Charge, as applicable, a competent replacement Dentist
in Charge is not hired within a reasonable time not to exceed thirty
(30) calendar days from the date of resignation, death or permanent
disability.
(l) Licensee fails to comply with any other network License
Agreement to which Licensee may be a party or has an interest.
(m) Licensee fails to comply with any provision of, or any
obligation under, any other agreement with DCA or any DCA Affiliate,
including, without limitation, any lease, loan agreement, purchase
contract or other obligation of Licensee.
(n) Licensee makes any untrue statement or representation of
material fact in this Agreement, in any document executed or delivered
in connection with this Agreement, or in any reports or financial
information submitted by or at the direction of Licensee to DCA, or
omits to state a material fact in any of the above documents required
or necessary to make the statements contained therein not misleading.
(o) Licensee or the Dentist in Charge, as applicable, fails
to pay to DCA when due any amounts owed, including, without limitation,
License Fees, amounts due for purchases from DCA or any DCA Affiliate,
or other payments due to DCA or any DCA Affiliate under the terms of,
in connection with or related to this Agreement, and does not correct
such failure within seven (7) calendar days after delivery of written
notice thereof. Notwithstanding the foregoing, if Licensee has
defaulted on any payment provision on two (2) or more separate
occasions within any twelve (12) consecutive month period, regardless
of whether the first such failure to pay was corrected within the cure
period set forth therein, DCA shall have the right to terminate the
License without providing Licensee with any opportunity to cure the
second payment default. Termination upon such event shall be effective
immediately upon DCA's delivery of written notice thereof to Licensee.
(p) Licensee or the Dentist in Charge, as applicable, fails
to comply with any applicable federal, state or local law, regulation
or ordinance, including, without limitation, OSHA, any applicable
licensing laws, or any applicable standards or regulations adopted by
any state or federal Board of Dentistry or the Department of Labor or
other similar governmental agency.
(q) Licensee breaches or fails to comply with any
representation, warranty, covenant or other provision contained in this
Agreement or any document executed in connection herewith, including
any updates or amendments to any of the foregoing, and does not correct
such breach within the applicable cure period, if any, provided herein
or therein.
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(r) Licensee fails to notify DCA of the occurrence of any
one or more of the events listed in Subsections (a) through (s) of this
Section 11, or of any malpractice claims threatened or brought against
Licensee or the Dental Office, within seventy two (72) hours of the
occurrence thereof.
(s) Licensee in any way defames Licensor or any DCA
affiliate, member of the network or through any other improper means
takes any action that is intended to be detrimental to the network, DCA
or any of DCA's members, directors, offices, employers,
representatives, agents, services or operations.
IF ANY MANDATORY PROVISIONS OF THE GOVERNING STATE LAW PROHIBIT
TERMINATION OF THE LICENSE OR LIMIT DCA'S RIGHT TO TERMINATE TO SOME OTHER BASIS
OR TERMS THAN ARE HEREIN PROVIDED, OR REQUIRE RENEWAL OF THE LICENSE, THEN SAID
MANDATORY PROVISIONS OF STATE LAW SHALL BE DEEMED INCORPORATED IN THIS AGREEMENT
BY REFERENCE AND SHALL PREVAIL OVER ANY INCONSISTENT TERMS HEREOF.
12. LICENSEE'S OBLIGATIONS UPON TERMINATION OR EXPIRATION.
Upon termination of the License, whether by DCA or Licensee, or upon
expiration of the term of the License or any renewal term thereof, Licensee
shall have the following obligations:
(a) Licensee shall immediately discontinue use of all
Licensed Marks, signs, structures literature, forms, promotional
advertising materials and any other article of personally indicative of
DCA or the Network, or which may be confusingly similar thereto, or any
designation indicating the existence of an affiliation between Licensee
and DCA or the Network. The foregoing shall include immediately taking
such action as may be required to cancel any and all assumed names or
equivalent registrations relating to or in any way utilizing one or
more of the Licensed Marks.
(b) Licensee shall take immediate steps to cancel or
otherwise discontinue its use or display of any references to the
Licensed Marks in any telephone or trade directories or in any
advertising.
(c) Licensee shall return to DCA any materials, signs and
displays loaned or leased to Licensee by DCA in connection with this
Agreement.
(d) Licensee shall, as DCA so directs, either destroy or
surrender to DCA all other items containing or displaying the Licensed
Marks.
(e) Licensee shall pay to DCA or the appropriate DCA
Affiliate, within ten (10) calendar days after the effective date of
termination or expiration of the License (or such later date on which
the amounts due to DCA or the DCA Affiliate are determined), all
amounts due under this Agreement as of the termination date.
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(f) Licensee shall not slander or libel the Network, DCA or
any of DCA's members, directors, officers, employees, representatives,
agents, services or operations.
(g) Upon termination or expiration of the License for any
reason, all rights and privileges accruing or granted to Licensee under
this Agreement and in connection with the License shall immediately
cease and terminate.
13. LATE PAYMENTS.
If any sums required to be paid by Licensee to DCA or any DCA Affiliate
under this Agreement are not paid when due, DCA shall have the right to charge
interest on such unpaid sums, such interest to begin accruing on the day
immediately following the date on which such sums are due, at the highest rate
allowed by law, or, if no such rate exists, at a rate of one and one-half
percent (1.5%) per month. All such payments received shall be credited, first,
against interest payments due and, second, against principal payments due. In
addition, DCA may discontinue Licensee's right to identify itself as a member of
the Network and to lease or purchase equipment, instruments, supplies and
products under any national marketing contracts entered into by DCA for the
benefit of the Network and its members if Licensee is delinquent in any
payments. In addition, in the event Licensee fails to make prompt payment to DCA
or any DCA Affiliate or any amounts required under this Agreement, DCA shall be
entitled to terminate the License granted hereunder.
13.1 EQUITABLE REMEDIES. Licensee agrees that any breach or
threatened breach of this Agreement by Licensee would cause irreparable and
immediate harm to DCA and that money would not be an adequate remedy in the
event of any such breach. By reason of the foregoing, Licensee acknowledges and
agrees that DCA shall be entitled to injunctive or other equitable relief,
including, without limitation, entry or temporary restraining orders and
temporary and permanent injunctions, in the event of any breach or threatened
breach of this Agreement. Licensee hereby irrevocably waives any claim or
defense that an adequate remedy is available at law, and agrees not to interpose
any claim or defense that an adequate remedy at law exists. Nothing in this
agreement shall prevent DCA from electing to seek any monetary or other relief
in addition to any equitable relief for breach or threatened breach of this
Agreement. The failure of DCA to institute a legal action promptly upon any such
breach shall not constitute a waiver of that or any other breach hereof. In the
event it is necessary for DCA to employ legal counsel to enforce any provision
of this Agreement, Licensee shall reimburse DCA for all legal expenses
associated therewith and in addition thereto, to the extent legal action is
taken, Licensee shall reimburse DCA for all costs of such action including court
costs or other expenses of litigation including reasonable attorneys' fees.
14. ASSIGNMENT.
14.1 BY LICENSEE. Except in connection with a sale of Licensee's
business, Licensee agrees that, during the Original Term of the License and for
any renewal terms thereof, Licensee shall not sell, assign, transfer, pledge or
mortgage the License or any interest therein, without the
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prior written consent of DCA, which consent (i) shall be at DCA's sole and
absolute discretion and (ii) may be subject to the satisfaction by Licensee or
the prospective transferee of the License, or both, of specific terms and
conditions, including, without limitation, executing DCA's current standard
license agreements, documents and instruments consent to transfer shall not be
unreasonably withheld.
14.2 BY DCA. Licensee acknowledges and agrees that DCA may at any
time sell or assign, in whole or in part, its interest in the License or any
part thereof, without the consent of Licensee. In addition, Licensee
acknowledges and agrees that DCA may, at any time during the term of the
License, offer any of its securities in connection with a public offering by
filing an effective registration statement under the Securities Act of 1933, as
amended, or any similar federal law then in force.
15. COVENANTS AND RESTRICTIONS.
Licensee acknowledges that by and through this Agreement it shall
receive confidential business information of Licensor, copyrighted information
of Licensor, trade secrets of Licensor, as well as other valuable business,
proprietary and professional information. Licensee will have the benefit of the
good will associated with the license mark and by being a network provider
obtain goodwill specifically in the tradename, trademark and service mark of
Dental Care Alliance and the marks as described in Paragraph 7 above and any
subsequent license marks adopted by Licensor.
During the term of this Agreement and for an additional five (5) year
period from the termination of the same Licensee agrees that it will not
disclose to any person or entity any trade secrets of Licensor, including but
not limited to promotional materials, marketing materials, assurance contracts,
customer lists, pricing information, advertising information, management
materials, preferred provider contracts, or insurance agreements, or like
materials solely relating to the Licensor or its business that the Licensee has
become privy to or has used during its involvement with Licensor.
Licensee acknowledges that the restraints set forth in the above
paragraphs are reasonable and necessary for the protection of legitimate
business interests of Licensor and that this covenant on the part of the
Licensee shall be construed as an Agreement. The existence of any claim or cause
of action of the Licensee shall not be construed as a defense to the enforcement
by the Licensor of this covenant. It is agreed by the Licensor and Licensee that
if any portion of this restrictive covenant is held unreasonable, arbitrary or
against public policy these covenants shall be considered to be diminishable
both as to time and geographical area, and each month for this specific period
shall be deemed a separate period of time and shall remain effective so long as
the same is not otherwise unreasonable, arbitrary or against public policy.
Licensee and Licensor hereby agree that in the event any court
determines any specific time period or any specific geographical area to be
unreasonable, arbitrary or against public policy, a lesser time period or
geographical area which is determined to be reasonable,
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non-arbitrary and not against public policy may be enforced against the
Licensee. The Licensee further understands that this covenant may be enforced by
the entering of a temporary or permanent injunction. It is understood that in
determining the enforceability of the restrictive covenant, the court shall not
consider any individual economic or other hardships that might be caused to the
person or entity against whom the enforcement is sought .
It is understood that a court of competent jurisdiction shall construe
this restrictive covenant in favor of providing reasonable protection to all
legitimate business interests established by Licensor. It is understood that the
court shall not employ any rule of contract construction that requires the court
to construe a restrictive covenant narrowly, against the restraint, or against
the drafter of the contract. It is understood that no court may refuse to
enforce this restrictive covenant on the grounds that the contract violates
public policy unless such public policy is articulated specifically by the court
and the court finds that the specific public policy requirements substantially
outweigh the need to protect the legitimate business interest or interests
established by Licensor.
It is understood that a court of competent jurisdiction shall enforce
this restrictive covenant by any appropriate and effective remedy, including,
but not limited to, temporary and permanent injunctions. The violation of this
restrictive covenant creates a presumption of irreparable injury to Licensor on
seeking its enforcement. Licensor will post a proper bond as set by the court if
an injunction is entered. In the event it becomes necessary for Licensor to
retain the services of an attorney to enforce this restrictive covenant, it is
agreed that the prevailing party shall be entitled to reasonable attorney's fees
and costs in any legal proceeding, both at the trial or appellate level.
Licensee agrees that this License Agreement and the restriction
contained herein are freely assignable by Licensor, in its sole discretion, and
any assignee, successor or third-party beneficiary to this agreement may enforce
the same.
The laws of the State of Florida shall control the interpretation of
this restrictive covenant and in particular, Florida Statute 542.335. Licensee
specifically agrees that the Twelfth Judicial Circuit in and for Sarasota
County, Florida, has jurisdiction over the enforcement of this restrictive
covenant, and that the Twelfth Judicial Circuit in and for Sarasota County,
Florida, will be the appropriate venue for any action brought pursuant to this
restrictive covenant.
16. INDEMNIFICATION.
Licensee shall indemnify, defend and hold harmless DCA, the DCA
Affiliates, and their respective members, stockholders, directors, officers,
employees, agents and representatives, from losses, liabilities, costs,
expenses, assessments, taxes, penalties, fines, claims, demands, actions, suits
and proceedings, including, without limitation, attorneys', accountants' and
other professionals, fees, costs and expenses of investigation and defense, and
disbursements incurred in connection therewith, as a result of (i) Licensee's
operation of the Dental Office in any respect, or (ii) any alleged malpractice
by Licensee or any of its agents or employees.
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16.1 DCA shall indemnify, defend and hold harmless Licensee, the
Licensee's Affiliates, and their respective members, stockholders, directors,
officers, employees, agents and representatives, from losses, liabilities,
costs, expenses, assessments, taxes, penalties, fines, claims, demands, actions,
suits and proceedings, including, without limitation, attorneys' fees,
accountants' and other professionals' fees, costs and expenses of investigation
and defense, and disbursements incurred in connection therewith, as a result of
(i) any activities, actions or omissions of DCA or its affiliates, employees,
officers or directors and (ii) any claims asserted or litigation brought by any
third party in connection with the Licensed Marks.
17. NOTICES.
Any notice or other communication required or permitted under this
Agreement shall be valid and effective only if given by written instrument that
is personally delivered by courier or sent by telegraph, telecopier, or
registered or certified mail, postage prepaid, addressed in accordance with the
addresses set forth below. Notice shall be deemed to be given upon the date of
transmission or, if mailed, three (3) calendar days after the date of deposit in
the U.S. Mail.
If to Licensee, to:
EIGHT MILE DENTAL, P.C.
511 West Eight Mile Road
Detroit, MI 48324
If to DCA, to:
Dental Care Alliance, Inc.
1343 Main Street, 7th Floor
Sarasota, Florida 34236
Telephone number: (941) 955-3150
Attention: Dr. Steven R. Matzkin, President
Any party may change the address at which it is to be given notice
hereunder by giving notice thereof to the other party in accordance with this
Section 17.
18. APPLICABLE LAW.
This Agreement has been executed and delivered in, and shall be
governed by and construed in accordance with the internal laws of the State of
Florida, without application of such State's conflicts of laws provisions.
19. WAIVER.
No failure of either party to exercise any right given to it hereunder,
or to insist upon strict compliance by the other of any obligation hereunder,
and no custom or practice of the
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parties at variance with the terms hereof shall constitute a waiver of such
party's right to demand exact compliance with the terms hereof. Waiver by either
party of any particular default by the other shall not affect or impair the
non-defaulting party's rights in respect to any subsequent default of the same
or of a different nature, nor shall any delay or omission of the non-defaulting
party's rights arising from such default, affect or impair the non-defaulting
party's right as to such default or any subsequent default.
20. SEVERABILITY.
If any applicable and binding law or rule of any jurisdiction requires
a greater prior notice of the termination of or refusal to renew the License
than is required hereunder, or the taking of some other action not required
hereunder, or if under any applicable and binding law or rule of any
jurisdiction any provision of this Agreement or any specification or standard
prescribed by this Agreement is invalid or unenforceable, the prior notice or
other action required by such law or rule shall be substituted for the
comparable provisions hereof, and the party shall have the right, in its sole
discretion, to modify such invalid or unenforceable provision, specification,
standard or operating procedure to the extent required to be valid and
enforceable.
21. ENTIRE AGREEMENT.
This Agreement contains the entire understanding of the parties hereto.
DCA has not authorized, nor will it authorize, any representations, whether
pertaining to anticipated volume of sales or the amount of profit to be realized
from the operation of the Dental Office, the desirability of the Dental Office's
location, or otherwise, or any other inducements, promises or agreements, oral
or otherwise, to be made to Licensee in any form whatsoever. Accordingly,
Licensee shall not be entitled to rely upon any such representations, if any
made by DCA, its agents, representatives or employees, or by any third party.
Licensee acknowledges that it has conducted an independent investigation of the
business contemplated by this Agreement and recognizes that, like any other
business, the nature of the business conducted by DCA may evolve and change over
time, that an investment in a Dental Office involves business risks, and that
the success of the venture is largely dependent upon the business abilities and
efforts of Licensee.
22. FULL FORCE AND EFFECT.
All obligations of DCA and Licensee which expressly or by their nature
survive the expiration or termination of this Agreement shall continue in full
force and effect subsequent to and notwithstanding such expiration or
termination, until such time as they are satisfied or by their nature expire.
23. EFFECTIVE DATE.
This Agreement shall be effective as of May 1, 1997.
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24. JOINT AND SEVERAL OBLIGATIONS.
If two (2) or more persons at any time constitute Licensee hereunder,
their obligations and liabilities to DCA hereunder shall be joint and several.
25. CERTIFICATION BY LICENSEE.
Licensee hereby certifies that it has had the opportunity to seek
advice of counsel prior to its execution of this Agreement, and that it has
opportunity to inspect the Network's business concept and review information
made available to it by DCA concerning the same. Licensee acknowledges that the
success of the business herein licensed is primarily dependent on Licensee's
skill and business acumen.
26. BREACH OF LICENSE AGREEMENT.
A breach of Dental Care Alliance, Inc.'s Administrative Service
Agreement by Licensee shall be considered a breach of this License Agreement and
a breach by the Licensee of the Dental Care Alliance License Agreement shall be
considered a breach of the Dental Care Alliance, Inc.'s Administrative Service
Agreement.
27. TERMINATION OF GOLDEN CARE NETWORK, L.L.C. AGREEMENTS.
The parties hereto acknowledge and agree that Licensee is entering into
this Agreement in replacement of any and all agreements by and between Licensee
and Golden Care Network, L.L.C. in effect on the date hereof (collectively, the
"GCN Agreements"). Accordingly, the parties hereto hereby acknowledge and agree
that, concurrently With the effectiveness of this Agreement, all of the GCN
Agreements shall immediately terminate and neither Licensee nor Golden Care
Networks, L.L.C. shall have any further rights, obligations or liabilities
thereunder.
28. TERMINATION OF LICENSE.
If Steven R. Matzkin or his assigns exercise rights under the Security
Agreement with related practices owned by David Ross Johnson, then this
Agreement shall terminate.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused their
duly authorized representatives to execute this License Agreement on the day and
year first above written.
DENTAL CARE ALLIANCE, INC., a
Delaware corporation
By:
-------------------------------
EIGHT MILE DENTAL, P.C., a Michigan
professional dental corporation
By:
-------------------------------
Printed Name:
---------------------
Title:
---------------------------
WITH RESPECT TO SECTION 27 HEREOF
GOLDEN CARE NETWORK, L.L.C.
By:
-------------------------------
Printed Name:
---------------------
Title:
---------------------------
16
<PAGE>
STATE OF FLORIDA
COUNTY OF SARASOTA
On this _____ day of ____________, 19__ before me personally appeared
Steven R. Matzkin, President of Dental Care Alliance, Inc., and who is
personally known to me or who has produced ____________________ as
identification and who did not take an oath, and subscribed and sworn to before
me by ____________________ and ____________________, the witnesses, on the _____
day of ___________, 19__.
--------------------------------
Notary Public
Print Name:
---------------------
My Commission expires:
STATE OF MICHIGAN
COUNTY OF _______________
On this _____ day of ____________, 19__ before me personally appeared
__________________________, the _______________ of Eight Mile Dental, P.C., and
who is personally known to me or who has produced ______________________________
as identification and who did not take an oath, and subscribed and sworn to
before me by ____________________ and ____________________, the witnesses, on
the _____ day of ____________, 19__.
--------------------------------
Notary Public
Print Name:
---------------------
My Commission expires:
ACKNOWLEDGEMENT OF GOLDEN CARE NETWORK, L.L.C.
The undersigned hereby acknowledges and agrees to be bound by the
provisions of Section 27 of this Agreement.
GOLDEN CARE NETWORK, L.L.C.
By:
------------------------------
President
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<PAGE>
EXHIBIT "A"
EMPLOYMENT CONTRACT
A-1
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made and entered into
as of the 26th day of January, 1994 by and between Golden Care Network, L.C., a
Florida limited liability company (the "Company"), and Mitchell Olan, an
individual resident of the State of Illinois ("Executive").
R E C I T A L S:
A. The Company is engaged in the business of, among other things,
providing management and consulting services to dental offices throughout the
United States (the "Business").
B. Executive has particular expertise and knowledge concerning the
Business and its operations.
C. The Company desires to employ Executive, and Executive desires to be
employed by the Company' as its Vice President and Chief Operating Officer,
subject to and upon the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. TERM. The term of this Agreement shall commence on the date hereof
and shall continue until the fourth (4th) anniversary hereof, unless otherwise
terminated in accordance with the term hereof. This Agreement shall b.
automatically renewed for successive one (1) year terms, unless sooner
terminated in accordance with the provisions hereof.
2. ENGAGEMENT AND SERVICES.
2.1 DUTIES. For the Term of this Agreement, including any
and all renewal terms hereof, unless otherwise terminated as provided herein r
Executive shall be the vice President and Chief Operating Officer of the
Company. In such capacity, Executive, subject to the direction of the President
of THE company (the "President") and the board of directors of the company (the
"Board"), shall supervise the overall MANAGEMENT and operations of the Company,
its personnel matters, as well as to provide input to the Company on business
strategy, Executive shall also perform such other duties and exercise such other
power and authority as may from time to time be delegated to Executive by the
President, provided, however, that such duties, power and authority ARE
commensurate with Executive's position with the Company. Executive shall also
provide support and assistance to the President with respect to the sales and
marketing activities of the Company,
2.2 EXCLUSIVE EMPLOYMENT. During the term of this Agreement,
Executive shall devote all of his business time, attention and efforts,
including, without limitation, during normal business hours, to the performance
of his duties; hereunder, and shall use his best
<PAGE>
endeavors in the performance thereof, as well as to the promotion of the general
interests and welfare of the Company. As such, Executive agrees that he will not
represent, accept any other employment from or render or perform any services
for, whether or not for compensation, any employer or entity other than the
Company, which representation or employment interferes with the performance of
his duties under this Agreement. Notwithstanding the foregoing, executive shall
have the option to serve on an outside board of directors or to conduct
complimentary services to a third party entity, PROVIDED, HOWEVER, that such
activity (i) does not conflict with Executive's duties hereunder, and (ii)
Executive obtains the Company's prior written consent to such Activity, which
consent shall not be unreasonably withheld.
2.3 LOCATION OF PERFORMANCE. Executive shall perform his
duties and obligations hereunder primarily from the Company/s main offices
located at Sarasota, Florida, and, from time to time, at other locations of the
Company, Notwithstanding the foregoing, Executive recognizes that he will be
required by the Company to travel from time to time in order to fulfill his
duties and obligations hereunder, and Executive agrees to so travel as necessary
or required.
3. COMPENSATION AND RELATED MATTERS.
3.1 BASE SALARY. The base salary (the "Base Salary") of
Executive for each calendar year of this Agreement shall be One Hundred Twenty
Thousand Dollars ($120,000) (or a proportionate amount for a shorter period),
payable in installments consistent with the Company's normal payroll schedule
(subject to applicable taxes and withholdings), or such greater amount as may be
determined each calendar year by the Company at the annual review of Executive.
Notwithstanding anything contained herein to the contrary, nothing in this
Agreement shall be deemed to require the Company to increase Executive's Base
Salary during the term of this Agreement.
3.2 PERFORMANCE PROGRAM. Executive shall be eligible to
participate 1n a performance bonus program. Pursuant thereto, the Company shall,
on July 1, 1995, pay to Executive, as additional incentive compensation for the
services to be rendered by Executive hereunder, assuming Executive is then
employed by the Company on such date, an incentive bonus in cash in an amount
equal to twenty percent (20%) of any additional principal payments required to
be made by Curtis Lee Smith, Jr. ("Smith") to the Company pursuant to Smith's
promissory note in favor of the Company, in accordance with the formula set
forth on SCHEDULE 1 attached hereto and made a part hereof, Executive shall not
be eligible to receive such a bonus pursuant to this SECTION 3.2 if the goals
set forth in SCHEDULE 1 attached hereto are not achieved by the Company for any
reason. In addition to the foregoing, executive shall be eligible to participate
in such other performance bonus programs as may from time to time be established
by the Company for the benefit of Executive.
3.3 WARRANTS. In addition to the Base Salary to be paid by
the Company to Executive pursuant to SECTION 3.1 hereof, the Company shall grant
Executive warrants (collectively, "Warrants") to purchase an amount equal to two
percent (2%) of the outstanding ownership interests in the Company computed as
of the date hereof, which translates into twenty (20) shares of equity ownership
of the Company. Such Warrants shall vest (i) twenty-five
2
<PAGE>
percent (25%) on the effective date of the commencement of Executives full-time
employment with the Company (the "Commencement Date"), and (ii) twenty-five
percent (25%) on each anniversary of the Commencement Date; provided, however,
that such Warrants shall fully vest sooner upon a public offering of securities
of the Company in which gross proceeds raised are at least Ten Million Dollars
($10,000,000) (a "Public Offering"). Such Warrants may be exercised by Executive
and converted to shares of equity ownership of the Company upon a Public
Offering assuming Executive is employed by the Company as of the date of such
Public Offering. The exercise or conversion price of the Warrants shall be One
Dollar ($1.00) per share. The ability of Executive to sell or transfer the
Warrants shall be restricted as provided in the Warrants. The Company will be
required to purchase and Executive will be required to sell the Warrants or, if
exercised and converted, the shares of equity ownership of the Company upon the
termination of Executive's employment with the Company as provided in the
Warrants and as described in SCHEDULE 2 attached hereto and made a part hereof.
3.4 STOCK OPTIONS. In the event the Company adopts an
employee stock option plan for its employees subsequent to the effective date
hereof, Executive shall, subject to the terms and condition" thereof, be
eligible to participate therein at a level commensurate with Executive's
position with the Company. It is contemplated that awards under such stock
option plan will be subject to individual and company performance targets being
attained.
4. EXPENSES.
4.1 LOCATING SUITABLE RESIDENCE. Except as otherwise
provided herein, the Company shall reimburse Executive for any and all
reasonable and necessary, actual out-of-pocket expenses paid or incurred by
Executive for himself and his family in connection with up to three (3)
round-trip excursions between Illinois and Florida taken solely for the purpose
of locating a suitable residence in Florida for purchase any Executive.
4.2 RELOCATION. Except as otherwise provided herein, the
Company adopts reimburse Executive for any and all reasonable and necessary,
actual out-of-pocket expenses paid or incurred by Executive in connection with
moving Executive and his family and their personal property from Illinois to
Florida. Relocation expenses that are subject to reimbursement by the Company
pursuant to this SECTION 4.2 shall include expenses incurred in connection with
the following:
(a) physical packing, moving and unpacking of
household goods;
(b) to three (3) months of storage of household
goods, it necessary;
(c) closing cost and reasonable attorney's fees (if
any) in connection with the purchase of a residence in Florida, and
(d) the physical transport of one vehicle from
Illinois to Florida.
4.3 ILLINOIS EXCURSIONS. During the period commencing on the
effective date hereof and ending Oh the date six (6) month. "hereafter r in
addition to the house hunting trips described in SECTION 4.1 hereof, the Company
shall, except as otherwise provided herein,
3
<PAGE>
reimburse Executive for any and all reasonable and necessary, actual
out-of-pocket travel expenses paid or incurred by Executive for himself in
connection with up to two (2) round-trip excursions between Illinois and Florida
per month in the event Executive ha" not secured permanent residence in Florida
as of such month, regardless of whether such excursions are taken for business
or pleasure.
4.4 EMPLOYMENT RELATED EXPENSES. Except as otherwise
provided herein, the Company shall reimburse executive for all reasonable and
necessary, actual out-of-pocket expenses paid or incurred by Executive solely in
connection with and in the course of the performance of his duties under this
Agreement consistent with company policy.
4.5 DETERMINATION OF REIMBURSABLE EXPENSES. All expenses for
which reimbursement is sought pursuant to this SECTION 4 must be supported by
receipts submitted by Executive to the Company. Such reimbursement of expenses
shall be paid by the Company to Executive within thirty (30) days after
Executive submits the receipts therefor to the company.
5. BENEFITS.
5.1 EMPLOYEE BENEFIT PROGRAMS. In addition to the
compensation to be paid by the Company to Executive pursuant to SECTION 3
hereof, during the term of this Agreement, Executive shall also be entitled to
receive the following benefits: (i) participation in a comprehensive group
medical and dental insurance plan of the company on the same basis as is
provided to the other full-time employees of the Company; (ii) participation in
such other benefit programs of the Company to the extent such programs are
provided to the other full-time employees of the Company; (iii) paid holidays
given by the Company to all of its employees; and (iv) ten (10) paid vacation
days for the first full year of Executive's employment with the Company and
fifteen (15) paid vacation days for each additional full year to be taken at
such time or times as are reasonably agreed upon between Executive and the
President and in accordance with the Company's then-current policies regarding
vacation time for its full-time officers and executives
5.2 LIFE INSURANCE. During the term of this Agreement, the
Company agrees to maintain a life insurance policy on the life of Executive
provided Executive is then insurable, the amount of such policy to be equal to
the Base Salary of Executive. Executive shall have the right to designate the
beneficiary of such policy.
5.3 COMPANY CAR. The Company will provide Executive with a
suitable automobile selected by Executive, subject to the approval of the
company, for use by Executive in the performance of his duties hereunder.
5.4 FURNISHED APARTMENT. For the period commencing on the
effective date hereof and ending on the earlier of (i) the closing date in
connection with Executive's purchase of a residence in Florida, and (ii) the
date six (6) months following the effective date hereof, the Company shall
provide Executive with the use of or shall reimburse Executive for the rent and
utility charges paid or incurred by Executive for a suitable, furnished
apartment located in Sarasota, Florida.
4
<PAGE>
6. TERMINATION.
6.1 TERMINATION FOR CAUSE. Notwithstanding anything
contained in this Agreement to the contrary, the Company, by written notice to
Executive, shall at all times have the right to terminate Executive's employment
hereunder for "Cause," as hereinafter defined, effective immediately upon
Executive's receipt of the Company's written notice of such termination. For
purposes of this SECTION 6 "cause" shall mean:
(i) Any material violation by Executive of any
local, state or federal law or regulation, provided that Executive's
compliance with such law or regulation is material to the performance
of his duties under this Agreement, or any conviction of felony by
Executive;
(ii) Executive's refusal or willful failure to
fulfill, or inability to perform, any material duties ox obligations
required to be performed for the company hereunder or any reason' or
Executive's refusal or repeated failure to perform or adhere to the
rules and regulations of the Company established by the company from
time to time, which refusal or failure is not cured within fourteen
(14) days after notice thereof is GIVEN by the Company to Executive; or
(iii) Any theft, fraud or embezzlement committed by
Executive.
On the effective date of the termination of Executive for
cause pursuant hereto, the Company shall have no further obligations or
liabilities to or for the benefit of Executive under this Agreement, except as
provided in SECTION 6.5 of this Agreement,
6.2 TERMINATION IN THE EVENT OF DEATH. Notwithstanding
anything contained in this Agreement to the contrary, this Agreement, and all
obligations and liabilities of the parties hereunder, shall immediately
terminate in the event of Executive's death.
6.3 TERMINATION WITHOUT CAUSE. Notwithstanding anything
contained in this Agreement to the contrary, the Company shall at all times have
the right to terminate Executive's employment hereunder without "cause" and for
any reason whatsoever by giving Executive at least thirty (30) calendar days,
prior written notice of its intent to so terminate. In the event of the
Company's election to terminate Executive's employment hereunder pursuant to
this. Section 6.3, such employment shall immediately and automatically terminate
upon the expiration of the thirty (30) calendar day notice period, without any
further notification or action on the part of the Company, unless Executive
gives the Company reason to terminate Executive for "Cause" in which case the
effective date of termination shall be immediate.
On the effective date of the termination of Executive without
Cause pursuant to this SECTION 6.3, the Company shall have no further
obligations or liabilities to or for the benefit of Executive under this
Agreement, except as provided in SECTION G.6 of this Agreement.
6.4 VOLUNTARY TERMINATION BY EXECUTIVE. Notwithstanding
anything contained in this Agreement to the contrary, Executive shall at all
times have the right to voluntarily terminate his employment hereunder by giving
the Company at least sixty (60) calendar days'
5
<PAGE>
prior written notice of his intent to so terminate. In the event of Executive`s
election to so terminate his employment hereunder pursuant to this SECTION 6.4,
such employment shall immediately and automatically terminate upon the
expiration of the sixty (60) calendar day notice period, without any further
notification or action on the part of Executive, unless Executive gives the
Company reason to terminate Executive for "Cause" in which case the effective
date of termination shall be immediate.
On the effective date of the voluntary termination of
Executive pursuant to this SECTION 6.4 the Company shall have no further
obligations or liabilities to or for the benefit of Executive under this
Agreement, except as provided in SECTION 6.5 of this Agreement.
6.5 PAYMENTS TO EXECUTIVE UPON TERMINATION OTHER THAN
WITHOUT CAUSE. Upon the termination of Executive's employment pursuant to this
SECTION 6.3, the Company shall be other than as provided in SECTION 6.3, the
Company shall be obligated to pay to Executive, and Executive shall be entitled
to receive from the Company; (i) Executive's Base Salary to the effective date
of termination; (ii) accrued vacation to the effective date of termination;
(iii) accrued bonuses, if any are declared by the company for Executive,
accruing prior to the effective date of termination; and (iv) any amounts for
which Executive is entitled to, but has not received, reimbursement in
accordance with SECTION 4 hereof, provided that such amounts were incurred prior
to the effective date of termination.
Upon payment to Executive of the foregoing items, the Company
shall have no further obligation or liability to or for the benefit of Executive
whatsoever.
6.6 PAYMENTS TO EXECUTIVE UPON TERMINATION WITHOUT CAUSE.
Upon the termination of Executive's employment pursuant to Section 6.3 hereof,
the Company shall be obligated to pay to Executive, and Executive shall be
entitled to receive from the Company, each of the items described in SECTION 6.3
hereof. In addition, the Company agrees to continue to pay the Base Salary to
Executive for the period commencing on the effective date of termination and
ending on the date nine (g) months thereafter. Further, Executive shall be
entitled to such performance bonus described in section 3.2 hereof that he
otherwise would have been entitled to receive had he not been terminated by the
Company without "Cause" pursuant to Section 6, 3 hereof.
Upon payment to Executive of the foregoing items, the Company
shall have no further obligations or liability to or for the benefit of
Executive whatsoever,
7. OFF-SET. The parties hereto agree that the Company shall have the
right to off-set, from, any amounts otherwise due and owing to Executive
pursuant to this Agreement, any and all undisputed amounts legitimately owed by
Executive to the Company or any of its Affiliate (as hereinafter defined),
whether pursuant to this Agreement or to any other agreement or obligation.
8. WITHHOLDING. All compensation payable to Executive pursuant to this
Agreement shall be subject to customary withholding taxes and such other
employment taxes as are required under federal law or the law of any state or
governmental body to be collected with respect to compensation paid by an
employer to an employee.
6
<PAGE>
9. CONFIDENTIAL INFORMATION. Executive acknowledges and agrees that
he has been given, and by virtue of his employment by the Company pursuant
hereto will be given, access to and possession of certain valuable and
confidential information, both verbal and written, proprietary to the Company,
including, without limitation, information regarding technical and non-technical
data, compilations, programs, methods, techniques, processes and financial data,
all of which is sufficiently secret to derive economic value, actual or
potential, from not being generally known to other persons who can obtain
economic value from its disclosure or use, and which is the subject of efforts
that are reasonable under the circumstances to maintain its secrecy or
confidentiality. Such proprietary and confidential information specifically
includes, without limitation: (a) instruction in and experience regarding the
methods of operation practiced by the Company; (b) lists of, or access to,
actual or potential customers and suppliers of the Company or the Business; (c)
trade secrets; (d) information contained in any memoranda, discussions, notes,
correspondence, surveys, investigations and the like by or between the employees
of the Company; (e) information received from employees, associate`:, officers
or consultants employed or retained by the Company pertaining to the Business or
the general operations of the Company; and (f) the Company's proprietary
advertising and marketing campaigns and strategies regarding the Business or the
Company..
All of such proprietary and confidential information and business relationships,
including, without limitation, that information and those business relationships
specified in this SECTION 9, are hereinafter collectively referred to as
"Confidential Information". Confidential Information, however, shall not include
any information that, through no act of Executive, has become available to the
general public. Executive shall hold in confidence and not use or disclose,
either for his own benefit or the benefit of any third party, either during or
after Executive's employment with the Company, except as specifically authorized
by the Company in writing for the Company's own benefit, any Confidential
Information that Executive may obtain or have obtained or may create or has
created during the period of Executive's employment hereunder. Upon termination
of Executive's employment with the Company for any reason, Executive shall
promptly return and deliver to the Company all documents, manual", letters,
notes, records, reports and all other materials of a secret or confidential
nature either obtained or arising as a result of Executive's employment
hereunder, including, without limitation, any and all forms and stages of
Confidential Information, that remain in his possession. The terms of this
SECTION 9 shall survive the termination of this Agreement for whatever reason.
10. NON-COMPETITION: NON-SOLICITATION. Executive agrees that, by
virtue of his employment with the Company, he has and will develop and obtain
knowledge and familiarity with the operations of the Company's Affiliates and
their respective businesses, operating and marketing procedures and the identity
of their respective customers, the disclosure of which would result in a
significant economic detriment to the Company. To protect the Company, for a
period of one (1) year commencing on the effective date of termination of
Executive's employment with the company for any reason, Executive shall not:
(i) Directly or indirectly, own, manage, operate, control or
participate in, or have any financial interest in or aid or assist
anyone in the conduct of, or otherwise engage in, any business
(whether it be a sole proprietorship, partnership, corporation or
other entity) that (a) in any way competes with the Company or its
Affiliates or any successor thereto, or their respective businesses,
or otherwise calls upon, solicits, advises,
7
<PAGE>
or does, or attempts to do, business with any client, customer or
patient of the Company or any of its Affiliates or any successor
thereto, and (b) is located or operating anywhere within the defined
licensed and/or franchised territory of the Company or any of its
Affiliates or any successor thereto, including, without limitation,
any office or location of any franchisee of the company or any of its
Affiliates or any successor thereto, PROVIDED, HOWEVER, that the
foregoing restriction "hall be null and void and o, no force or effect
in the event that Executive is terminated without "Cause" pursuant to
SECTION 6.3 hereof; or
(ii) Solicit or otherwise encourage any employee of Company
or any of its Affiliates or any successor thereto to terminate his or
her employment with the company or any of its Affiliates or any
successor thereto, or to enter into employment with any other person,
firm or corporation.
In addition, Executive agrees that he shall not, in any way, slander,
libel or through any other improper means take any action that is intended to be
detrimental to the company or any of its Affiliates or any successor thereto, or
their respective businesses, services, officers, personnel or operations.
For purposes of this Agreement, an "Affiliate" of an entity shall mean
any person, corporation, proprietorship, partnership, trust, limited liability
company or other business entity that, directly or indirectly, owns or control,
is under common ownership or control with, or is owned or controlled by, such
entity. For purposes of this definition, "control" means the possession of the
power to direct or cause the direction of management and policies of such
entity, whether through the ownership of voting securities, by contract or
otherwise
If any provision or part of this SECTION 10 is held to be unenforceable
because of the duration of such provision or the area covered thereby, Executive
agrees that the court making such determination "hall have the power to modify
such provision, to reduce the duration or area of such provision, or both, or to
delete specific words or phrases herefrom ("blue-penciling") in a manner that
would provide the greatest possible protection to the Company' and then, in its
reduced or blue-penciled form, such provision on shall then be enforceable and
shall be enforced.
11. EQUITABLE REMEDIES. Executive agrees that the covenants
contained in Sections 9 and 10 hereof are vital to the viability of the company,
its Affiliates and each of their respective businesses. In that regard,
Executive agrees that any breach of SECTION 9 OR 10 hereof would cause
irreparable and immediate harm to the Company and that money would not be an
adequate remedy in the event of any such breach. By reason of the foregoing,
Executive agrees that the Company shall be entitled to injunctive relief in the
event of any breach of Section 9 or 10 hereof. In addition, Executive agrees to
reimburse the Company and its Affiliates for any and all reasonable costs and
expenses (including, without limitation, attorneys' fees and costs) incurred by
the Company or any of its Affiliates as a result of their enforcing the terms
and provisions of this Agreement and their instituting or defending any
litigation, contest, dispute, suit or proceeding against Executive in any way
relating to this Agreement, provided that the Company prevail" in such action.
Nothing herein shall prevent the Company or any of its Affiliates from electing
to seek any monetary or other relief in addition to or in lieu of any equitable
relief for breach of Sections 9 or 10 hereof. The failure of the Company or any
of its Affiliates to promptly
8
<PAGE>
institute a legal action upon any such breach shall not constitute a waiver of
that or any other breach hereof.
12. NOTICES. Any notices, demands, requests, consents or Approvals
to be given hereunder shall be in writing and shall be deemed given when
delivered personally to the person to whom intended, two (2) days after deposit
in the United states mail, certified, postage prepaid, return receipt requested,
one (1) day after deposit with a commercial courier sent for next day delivery,
or upon transmittal if telecopied, to the following addresses:
If to Executive, to: Mitchell Olan
------------------------------
Telecopier Number: ___________
If to the Company, to: Golden Care Network, L.C.
1343 Main Street, 5th Floor
Sarasota, Florida 34236
Attention: President
Telecopier Number: (813) 366-9615
Any party hereto may change his or its address for notice by
communicating such change of address to the other party.
13. Applicable Law This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
14. NONASSIGNABLE RIGHTS. This Agreement and all rights and benefits
hereunder are binding upon and shall inure to the benefit of Executive and the
Company, as well as to the benefit of the company's successors. The obligations
of Executive hereunder are personal to Executive; accordingly, neither this
Agreement nor any right or interest of Executive herein, or arising hereunder,
shall be voluntarily or involuntarily sold, transferred or assigned by Executive
without the prior written consent of the Company or its successor in interest.
This Agreement shall be assignable by the Company, provided, however, that in
the event (i) the Company sells all or substantially all of its assets to a
third party, or (ii) majority control of the Company is transferred to any third
party, Executive shall have the right to terminate his employment hereunder, and
such termination shall be deemed a termination without " Cause "
15. SEVERABILITY. In the event that any provision of this Agreement is
determined to be invalid or unenforceable, the remaining terms and provisions of
this Agreement shall be unaffected and shall remain in full force and effect,
and any such determination of invalidity or unenforceability shall in no way
affect the validity or enforceability of any other provision of this Agreement.
16. WAIVER. No delay on the part of any party in exercising any right,
power or privilege shall operate as a waiver thereof, nor shall any waiver of
any right, power or privilege operate as a waiver of any other
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<PAGE>
right, power or privilege, nor shall any single or partial exercise of any
right, power or privilege preclude any other or further exercise thereof or of
any other right, power or privilege. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedy which the parties
otherwise may have at law or in equity.
17. HEADINGS. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or construction hereof.
18. ENTIRE AGREEMENT. This instrument sets forth the entire agreement
and understanding between the parties hereto with respect to Executive's
employment by the Company and supersedes all prior and contemporaneous
discussions and agreements with respect thereto, This Agreement may only be
modified in a writing signed by both parties hereto,
19. COUNTERPART. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument,
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written.
GOLDEN CARE NETWORK, L.C.
By:____________________________________
Its:___________________________________
_______________________________________
Mitchell Olan
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<PAGE>
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This Amendment No. 1 to Employment Agreement (this "Amendment") is made
and entered into as of October 25, 1996 by and between Dental Care Alliance,
Inc., a Delaware corporation (the "Company"), and Mitchell B. Olan, an
individual resident of the State of Florida ("EXECUTIVE").
RECITALS
A. The Company and Executive are parties to that certain Employment
Agreement, dated as or January 26, 1994, by and between Golden Care Network,
L.C. ("Golden Care") and Executive (the "AGREEMENT").
B. Golden Care was merged with and into the Company and upon the
effectiveness of such merger all of the outstanding assets and liabilities of
Golden Care became outstanding assets and liabilities of the Company (the
"MERGER") .
C. In connection with the Merger, the parties hereto are amending the
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. AFFIRMATION OF AGREEMENT. The Company and the Executive hereby
acknowledge and agree to be bound to the terms and conditions of, and that all
rights and benefit under the Agreement, as amended, shall inure to the benefit
of Executive and the Company as successor to Golden Care.
2. AMENDMENT. The Agreement is hereby amended as follows:
(a) Section 3.3 is deleted in its entirety and the
following is substituted in lieu thereof:
3.3 WARRANTS. In addition to the Base Salary to be
paid .by the Company to Executive pursuant to SECTION 3.1 hereof, the
Company grants Executive warrants (collectively, "WARRANTS") to
purchase an amount equal to four percent (4%) of the outstanding Common
Stock of the Company, $0.01 par value per share (the "COMMON STOCK"),
computed as of the date hereof, which translates into Two Thousand
(2,000) shares of Common Stock (as adjusted pursuant to the Warrant
Agreement defined below). Such Warrants may be exercised by Executive
and converted to Common Stock as provided in the Warrant Agreement,
dated as of the date hereof, between the Company and the Executive (the
"WARRANT AGREEMENT"). The ability of Executive co sell or transfer the
Warrants shall be restricted as provided in the Warrant Agreement. Upon
the termination of Executive's employment with the Company, for any
reason, Executive
<PAGE>
shall be obligated to exercise and convert the Warrants and sell the
Common Stock obtained upon conversion of the Warrants to the Company
and the Company shall be obligated to purchase such Common Stock as
provided in SCHEDULE 2 attached hereto and made a part hereof. The
purchase price for such Common Stock obtained upon conversion of the
Warrants hereof shall be paid in cash in three consecutive equal annual
installments, the first installment due ten (10) days after the date
the Company receives written notice of Executive's election to exercise
the Warrants, and the SECOND and third installments due on the first
and second anniversaries of such date
(b) SCHEDULE 2 is deleted in its entirety and SCHEDULE 2
attached hereto and made a part hereof is substituted in lieu thereof.
(c) SECTION 5.1 is amended by adding the following to end of
SUBSECTION (I):
PROVIDED, that if Executive chooses to opt out of coverage under the
Company's comprehensive group medical insurance plan and gives written
notice of such election to the Company, the Company shall pay to
Executive One Hundred Fifty Dollars ($150) per month in lieu of
granting Executive coverage under such medical insurance plan;
(d) SECTION 5.3 is deleted in its entirety and the following
is substituted in lieu thereof:
5.3 AUTOMOBILE ALLOWANCE. Except as otherwise
provided herein, the Company shall pay to Executive, during the term of this
Agreement, up to Five Hundred Dollars ($500) per month to be used by Executive,
in his sole discretion, for expenses paid or incurred by Executive in connection
with the acquisition, use and maintenance of an automobile by Executive. In
addition to the foregoing, Executive shall be reimbursed for the cost of any gas
purchased by Executive for use in an automobile driven by him for business
purposes as requested by the Company; PROVIDED, that such business purposes
involve travel by automobile to destinations outside of a hundred (100) mile
radius of the Executive's permanent residence.
(e) The following shall be added in its entirety after the
last sentence in the first paragraph of each of SECTION 6.5 and SECTION 6.6:
In addition, the Company shall be obligated to purchase from Executive and
Executive shall be obligated to convert all Warrants and sell to the Company all
Common Stock obtained upon exercise and conversion of such Warrants at the
purchase price set forth in SCHEDULE 2 attached hereto and made a part hereof.
3. MISCELLANEOUS.
(a) HEADING. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or construction hereof
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(b) REFERENCES. Any reference to the Agreement contained in
any notice, request, certificate' or other document executed concurrently with
or after the execution and delivery of this Amendment shall be deemed to include
this Amendment unless the context shall otherwise require.
(c) CONTINUED EFFECTIVENESS. Notwithstanding anything
contained herein, the terms of this Amendment are not intended to and do not
serve to effect a novation as to the Agreement. The Agreement, as amended
hereby, shall remain in full force and effect.
(d) COUNTERPART. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
(e) GOVERNING LAW. THIS AMENDMENT SHALL BE A CONTRACT MADE
UNDER AND GOVERNED BY THE LAWS OF THE STATE OF FLORIDA WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES.
(f) SUCCESSORS AND ASSIGNS. In the event that any provision
of this Amendment is determined to be invalid or unenforceable, the remaining
terms and provisions of this Amendment shall be unaffected and shall remain in
full force and effect, and any such determination of invalidity or
unenforceability shall in no way affect the validity or enforceability of any
other provision of this Amendment.
(g) SUCCESSORS AND ASSIGNS. This Amendment and all rights and
benefits hereunder are binding upon and shall inure to the benefit of Executive
and the Company, as well as to the benefit of the Company, s successors. The
obligation of Executive hereunder are personal to Executive; accordingly,
neither this Amendment nor any right ox interest of Executive herein, or arising
hereunder, shall be voluntarily or involuntarily sold, transferred ox assigned
by Executive without the prior written consent of the Company or its successor
in interest.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
DENTAL CARE ALLIANCE, INC.
By: _________________________________________
Name: Steven R. Matzkin
Title: President
Equity Holder:
--------------------------------------------
Mitchell B. Olan
3
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into as of the 21st
day of January, 1997 by and between Dental Care Alliance, Inc., a Delaware
Corporation ("Company"), and David P. Nichols, an individual resident of the
State of Florida ("Executive").
RECITALS
A. The Company is engaged in the business of, among other things,
providing management and consulting services to dental offices throughout the
United States (the "Business").
B. Executive has particular expertise and knowledge concerning the
Business and its operations.
C. The Company desires to employ Executive, and Executive desires to be
employed by the Company, as its Chief Financial Officer, subject to and upon the
terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. TERM
The term of this Agreement shall commence on the date hereof and shall
continue until the fourth (4th) anniversary hereof, unless otherwise
terminated in accordance with the terms hereof. This Agreement shall be
automatically renewed for successive one (1) year terms, unless sooner
terminated in accordance with the provisions hereof.
2. ENGAGEMENT AND SERVICES
2.1 DUTIES. For the term of this Agreement, including any and all
renewal terms hereof, unless otherwise terminated as provided
herein, Executive shall be the Chief Financial Officer of the
Company. In such capacity, Executive, subject to the direction of
the President of the Company (the "President") and the board of
directors of the Company (the `Board"), shall supervise the
overall financial, accounting and information systems of the
Company, as well as to provide input to the Company on business
strategy. Executive shall also perform such other duties and
exercise such other power and authority as may from time to time
be delegated to Executive by the President, PROVIDED, HOWEVER,
that such duties, power and authority are commensurate with
Executive's position with the Company.
<PAGE>
2.2 EXCLUSIVE EMPLOYMENT. During the term of this Agreement,
Executive shall devote all of his business time, attention and
effort, including, without limitation, during normal business
hours, to the performance of his duties hereunder, and shall use
his best endeavors in the performance thereof, as well as to the
promotion of the general interest and welfare of the Company.
2.3 LOCATION OF PERFORMANCE. Executive shall perform his duties and
obligations hereunder primarily from the Company's main offices
located in Sarasota, Florida and, from time to time, at other
locations of the Company. Notwithstanding the foregoing,
Executive recognizes that he will be required by the Company to
travel from time to time in order to fulfill his duties and
obligations hereunder, and Executive agrees so travel as
necessary or required.
3. COMPENSATION AND RELATED MATTERS
3.1 BASE SALARY. The base salary ("Base Salary') of Executive,
following commencement of employment, shall be eighty-five
thousand dollars ($85,000), payable in installments consistent
with the Company's normal payroll schedule (subject to applicable
taxes and withholdings), or such greater amount as may be
determined each year by the Company at the annual review of
Executive. Notwithstanding the above, in the event of a public
offering by the Company, Executive's salary shall be increased to
one hundred and twenty thousand dollars ($120,000) and thereafter
be adjusted annually commensurate with that salary of a CFO with
a similarly sized public company.
3.2 OPTIONS. In addition to the Base Salary to be paid by the Company
to Executive pursuant to Section 3.1 hereof, the Company shall
grant Executive options (collectively, "Options") to purchase an
amount equal to 608 common shares in the Company computed as of
the date hereof. Such Options shall be exercisable in whole or in
part immediately. Options will expire on January 21, 2002. The
exercise or conversion price of the Warrants shall be at fair
market value.
4. EXPENSES
4.1 EMPLOYMENT RELATED EXPENSES. Except as otherwise provided herein,
the Company shall reimburse Executive for all reasonable and
necessary, actual out-of-pocket expenses paid or incurred by
Executive solely in connection with and in the course of the
performance of his duties under this Agreement consistent with
Company policy.
4.2 DETERMINATION OF REIMBURSABLE EXPENSES. All expenses for which
reimbursement is sought pursuant to this Section 4 must be
supported by receipts submitted by Executive to the Company. Such
reimbursement of expenses shall be paid by the Company to
Executive within thirty (30) days after Executive submits the
receipts therefor to the Company.
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<PAGE>
5. BENEFITS
5.1 EMPLOYEE BENEFIT PROGRAMS. In addition to the compensation to be
paid by the Company to Executive pursuant to Section 3 hereof,
during the term of this Agreement, Executive shall also be
entitled to receive the following benefits: (i) participation in
a comprehensive group medical and dental insurance plan of the
Company with premiums to be reimbursed by the Company; (ii)
participation in such other benefit programs of the Company to
the extent such programs are provided to the other full-time
employees of the Company; (iii) paid holidays given by the
Company to all of its employees; and (iv) ten (10) paid vacation
days during the first full year of Executive's employment with
the Company and fifteen (15) paid vacation days for each
additional full year to be taken at such time or times as are
reasonably agreed upon between Executive and the President and in
accordance with the Company's then current policies regarding
vacation time for its full-time officers and executives.
5.2 LIFE INSURANCE. During the term of this Agreement, the Company
agrees to maintain a life insurance policy on the life of the
Executive, provided the Executive is then insurable, the amount
of such policy be equal to the Base Salary of Executive.
Executive shall have the right to designate the beneficiary of
such policy.
6. TERMINATION
6.1 TERMINATION FOR CAUSE. Notwithstanding anything contained in
this Agreement to the contrary, the Company, by written notice to
Executive, shall at all times have the right to terminate
Executive's employment hereunder for "Cause", as hereinafter
defined, effective immediately upon Executive's receipt of the
Company's written notice of such termination. For purposes of
this SECTION 6, "Cause" shall mean: -----------
(i) Any material violation by Executive of any local, state
or federal law or regulation, provided that Executive's
compliance with such law or regulation is material to
the performance of his duties under this Agreement, or
any conviction of a felony by Executive;
(ii) Executive's refusal or willful failure to fulfill, or
inability to perform, any material duties or
obligations required to be performed for the Company
hereunder for any reason, or Executive's refusal or
repeated failure to perform or adhere to the rules and
regulations of the Company established by the Company
from time to time, which refusal or failure is not
cured within fourteen (14) days after notice thereof is
given by the Company to Executive;
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<PAGE>
(iii) Any theft, fraud or embezzlement committed by
Executive.
On the effective date of the termination of Executive for Cause pursuant hereto,
the Company shall have no further obligations or liabilities to or for the
benefit of Executive under this Agreement, except as provided in SECTION 6.5 of
this Agreement.
6.2 TERMINATION IN THE EVENT OF DEATH. Notwithstanding anything
contained in this Agreement to the contrary, this Agreement, and
all its obligations and liabilities of the parties hereunder,
shall immediately terminate in the event of Executive's death.
6.3 TERMINATION WITHOUT CAUSE. Notwithstanding anything contained
in this Agreement to the contrary, the Company shall at all times
have the right to terminate Executive's employment hereunder
without "Cause" and for any reason whatsoever by giving Executive
at least thirty (30) calendar days' prior written notice of its
intent to so terminate. In the event of the Company's election to
terminate Executive's employment hereunder pursuant to this
SECTION 6.3, such employment shall immediately and automatically
terminate upon the expiration of the thirty (30) calendar day
notice period, without any further notification or action on the
part of the Company, unless Executive gives the Company reason to
terminate Executive for "Cause" in which case the effective date
of termination shall be immediate.
On the effective date of termination of Executive without Cause
pursuant to SECTION 6.3, the Company shall have no further
obligations or liabilities to or for the benefit of Executive
under this Agreement, except as provided in SECTION 6.6 of this
Agreement.
6.4 VOLUNTARY TERMINATION BY EXECUTIVE. Notwithstanding anything
contained in this Agreement to the contrary, Executive shall at
all times have the right to voluntarily terminate his employment
hereunder by giving the Company at least thirty (30) days' prior
written notice of his intent to so terminate. In the event of
Executive's election to terminate his employment hereunder
pursuant to this SECTION 6.4, such employment shall immediately
and automatically terminate upon the expiration of the thirty
(30) calendar day notice period, without any further notification
or action on the part of Executive, unless Executive gives the
Company reason to terminate Executive for "Cause" in which case
the effective date of termination shall be immediate.
On the effective date of the voluntary termination of Executive
pursuant to this SECTION 6.4, the Company shall have no further
obligations or liabilities to or for the benefit of Executive
under this Agreement, except as provided in SECTION 6.5. of this
Agreement.
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<PAGE>
6.5 PAYMENTS TO EXECUTIVE UPON TERMINATION, OTHER THAN WITHOUT
CAUSE. Upon the termination of Executive's employment pursuant to
this Section 6 other than as provided in SECTION 6.3, the Company
shall be obligated to pay to Executive, and Executive shall be
entitled to receive from the Company: (i) Executive's Base Salary
to the effective date of termination; (ii) accrued vacation to
the effective date of termination; (iii) accrued bonuses, if any
are declared by the Company for Executive, accruing prior to the
effective date of termination; and (iv) any amounts for which
Executive is entitled to, but has not received, reimbursement in
accordance with SECTION 4 hereof, provided that such amounts were
incurred prior to the effective date of termination.
Upon payment to Executive of the foregoing items, the Company
shall have no further obligations or liability to or for the
benefit of Executive whatsoever.
6.6 PAYMENTS TO EXECUTIVE UPON TERMINATION WITHOUT CAUSE. Upon the
termination of Executive's employment pursuant to Section 6.3
hereof, the Company shall be obligated to pay to Executive, and
Executive shall be entitled to receive from the Company, each of
the items described in Section 6.5 hereof. In addition, the
Company agrees to continue to pay the Base Salary to Executive
for the period commencing on the effective date of termination
and ending on the date six (6) months thereafter. Further,
Executive shall be entitled to such performance bonus described
in Section 3.2 hereof that he otherwise would have been entitled
to receive had he not been terminated by the Company without
"Cause" pursuant to Section 6.3 hereof.
Upon payment to Executive of the foregoing items, the Company
shall have no further obligations or liability to or for the
benefit of Executive whatsoever.
7. OFF-SET
The parties hereto agree that the Company shall have the right to
off-set, from any amounts otherwise due and owing to Executive
pursuant to this Agreement, any and all undisputed amounts
legitimately owed by Executive to the Company or any of its Affiliates
(as hereinafter defined), whether pursuant to this Agreement or to any
other agreement or obligation.
8. WITHHOLDING
All compensation payable to Executive pursuant to this Agreement shall
be subject to customary withholding taxes and such other employment
taxes as are required under federal law or the law of any state or
governmental body to be collected with respect to compensation paid by
an employer to an employee.
5
<PAGE>
9. CONFIDENTIAL INFORMATION
Executive acknowledges and agrees that he has been given, and by
virtue of his employment by the Company pursuant hereto will be given,
access to and possession of certain valuable and confidential
information, both verbal and written, proprietary to the Company,
including, without limitation, information regarding technical and
non-technical data, compilations, programs, methods, techniques,
processes and financial data, all of which is sufficiently secret to
derive economic value, actual or potential, from not being generally
known to other persons who can obtain economic value from its
disclosure or use, and which is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy or
confidentiality.
Such proprietary and confidential information specifically includes,
without limitation:
(i) instruction in ad experience regarding the methods of operation
practiced by the Company; (ii) lists of, or access to, actual or
potential customers and suppliers of the Company or the Business;
(iii) trade secrets; (iv) information contained in any memoranda,
discussions, notes, correspondence, surveys, investigations and the
like by or between the employees of the Company; (v) information
received from employees, associates, officers or consultants employed
or retained by the Company pertaining to the Business or the general
operations of the Company; and (vi) the Company's non-public financial
data and strategy.
All of such proprietary and confidential information and business
relationships, including, without limitation, that information and
those business relationships specified in this SECTION 2, are
hereinafter collectively referred to as "Confidential Information".
Confidential information, however, shall not include any information
that, through no act of Executive, has become available to the general
public. Executive shall hold in confidence and not use or disclose,
either for his own benefit or the benefit of any third party, either
during or after Executive's employment with the Company, except as
specifically authorized by the Company in writing for the Company's
own benefit, any Confidential Information that Executive may obtain or
has obtained or may create or has created during the period of
Executive's employment hereunder. Upon termination of Executive's
employment with the Company for any reason, Executive shall promptly
return and deliver to the Company all documents, manuals, letters,
notes, records, reports and all other materials of a secret or
confidential nature either obtained or arising as a result of
Executive's employment hereunder, including, without limitation, any
and all forms and stages of Confidential Information, that remain in
his possession. The terms of this SECTION 9 shall survive the
termination of this Agreement for whatever reason.
10. NON-COMPETITION; NON-SOLICITATION
Executive agrees that, by virtue of his employment with the Company,
he has and will develop and obtain knowledge and familiarity with the
operations of the Company, its Affiliates and respective businesses,
operating and marketing procedures and the identity
6
<PAGE>
of their respective customers, the disclosure of which would result in
a significant economic detriment to the Company. To protect the
Company, for a period of one (I) year commencing on the effective date
of termination of Executive's employment with the Company for any
reason, Executive shall not:
(i) Directly or indirectly, own, manage, operate, control or
participate in, or have any financial interest in or aid or
assist anyone in the conduct of, or otherwise engage in, any
business, (whether it be a sole proprietorship, partnership,
corporation or other entity) that (a) in any way competes with
the Company or its Affiliates or any successor thereto, and (b)
is located or operating anywhere within the defined licensed
and/or franchised territory of the Company or any of its
Affiliates or any successor thereto, including, without
limitation, any office or location of any franchisee of the
Company or any of its Affiliates or any successor thereto,
provided, however, that the foregoing restriction shall be null
and void and of no force or effect in the event that the
Executive is terminated without "Cause" pursuant to SECTION 6.3
hereof; or
(ii) Solicit or otherwise encourage any employee of Company or any of
its Affiliates or any successor thereto to terminate his or her
employment with the Company or any of its Affiliates or any
successor thereto, or to enter into employment with any other
person, firm or corporation.
In addition, Executive agrees that he shall not, in any way, slander,
libel, or through any other improper means take any action that is
intended to be detrimental to the Company or any of its Affiliates or
any successor thereto, or their respective businesses, services,
officers, personnel or operations.
For purposes of this Agreement, an "Affiliate" of an entity shall mean
any person, corporation, proprietorship, partnership, trust, limited
liability company or other business entity that, directly or
indirectly, owns or controls, is under common ownership or control
with, or is owned or controlled by, such entity. For purposes of this
definition, "control" means the possession of the power to direct or
cause the direction of management and policies of such entity, whether
through the ownership of voting securities, by contract or otherwise.
If any provision or part of this Section 10 is held to be
unenforceable because of the duration of such provision or the area
covered thereby, Executive agrees that the court making such
determination shall have the power to modify such provision, to delete
specific words or phrases here from ("blue-penciling") in a manner
that would provide the greatest possible protection to the Company,
and then, in its reduced or blue-penciled form, such provision shall
then be enforceable and shall be enforced.
11. EQUITABLE REMEDIES
Executive agrees that the covenants contained in Sections 9 and 10
hereof are vital to the viability of the Company, its Affiliates and
each of their respective businesses. In that regard, Executive agrees
that any breach of Section 9 or 10 hereof would cause
7
<PAGE>
irreparable and immediate harm to the Company and that money would not
be an adequate remedy in the event of any such breach. By reason of
the foregoing, Executive agrees that the Company shall be entitled to
injunctive relief in the event of any breach of Section 9 or 10
hereof. In addition, Executive agrees to reimburse the Company and its
Affiliates for any and all reasonable costs and expenses (including,
without limitation, attorney's fees and costs) incurred by the Company
or any of its Affiliates as a result of their enforcing the terms and
provisions of this Agreement and their instituting or defending any
litigation, contest, dispute, suit or proceeding against Executive in
any way relating to this Agreement, provided that the Company prevails
in such action. Nothing herein shall prevent the Company or any of its
Affiliates from electing to seek any monetary or other relief in
addition to or in lieu of any equitable relief for breach of Section 9
or 10 hereof. The failure of the Company or any of its Affiliates to
promptly institute a legal action upon any such breach shall not
constitute a waiver of that or any other breach hereof.
12. NOTICES
Any notices, demands, requests, consents or approvals to be given hereunder
shall be in writing and shall be deemed given when delivered personally to the
person to whom intended, two (2) days after deposit in the United States mail,
certified, postage prepaid, return receipt requested, one (1) day after deposit
with a commercial courier sent for next day delivery, or upon transmittal if
telecopied, to the following addresses:
If to Executive: David P. Nichols
514 Bayside Way
Nokomis, FL 34275
If to the Company: Dental Care Alliance, Inc.
1343 Main Street, 7th Floor
Sarasota, FL 34236
Attention: President
Fax: (941) 366-9615
Any party hereto may change his or its address for notice by
communicating such change of address to the other party.
13. APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of Florida.
14. NONASSIGNABLE RIGHTS
This Agreement and all rights and benefits hereunder are binding upon
and shall inure to the benefit of Executive and the Company, as well
as to the benefit of the Company's
8
<PAGE>
successors. The obligations of Executive hereunder are personal to
Executive; accordingly, neither this Agreement nor any right or
interest of Executive herein, or arising hereunder, shall be
voluntarily or involuntarily sold, transferred or assigned by
Executive without the prior written consent of the Company or its
successor in interest. This Agreement shall be assignable by the
Company, provided, however, that in the event (i) the Company sells
all or substantially all of its assets to a third party, or (ii)
majority control of the Company is transferred to any third party,
Executive shall have the right to terminate his employment hereunder,
and such termination shall be deemed a termination without "Cause".
15. SEVERABILITY
In the event that any provision of this Agreement is determined to be
invalid or unenforceable, the remaining terms and provisions of this
Agreement shall be unaffected and shall remain in full force and
effect, and any such determination of invalidity or unenforceability
shall in no way affect the validity or enforceability of any other
provision of this Agreement.
16. WAIVER
No delay on the part of any party in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any waiver of
any right, power or privilege operate as a waiver of any right, power
or privilege, nor shall any single or partial exercise of any right,
power or privilege preclude any other or further exercise thereof or
any other right, power or privilege. The rights and remedies herein
provided are cumulative and are not exclusive of any rights or
remedies which the parties otherwise may have at law or in equity.
17. HEADINGS
The section and other headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
construction hereof.
18. ENTIRE AGREEMENT
This instrument sets forth the entire agreement and understanding
between the parties hereto with respect to Executives employment by
the Company and supersedes all prior and contemporaneous discussions
and agreements with respect thereto. This Agreement may only be
modified in writing, signed by both parties hereto.
19. COUNTERPARTS
This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement
as of the date first written above.
DENTAL CARE ALLIANCE, INC.
By:__________________________________
Steven R. Matzkin
President
By:__________________________________
David P. Nichols
10
EXHIBIT 10.14
DENTAL CARE ALLIANCE, INC.
STOCK OPTION AGREEMENT
1. GRANT OF OPTION. As of the 21st day of January, 1997, Dental Care
Alliance, Inc., a Delaware corporation (the "Company"), hereby grants to David
P. Nichols (the "Optionee"), a nonstatutory stock option (the "Option") to
acquire 608 shares of common stock, $.01 par value, of the Company.
2. EXERCISE PRICE. The exercise price per share of the Shares subject
to this Option is $______. The exercise price for the Shares subject to this
Option shall be paid by delivery of a five-year promissory note (the "Note") in
the amount of the aggregate exercise price for the Shares purchased pursuant to
exercise of the Option, which Note shall bear interest at 8% per annum and shall
be secured by such shares.
3. EXERCISE SCHEDULE. This Option shall be exercisable in whole or in
part immediately. In no event shall this Option be exercisable after January 21,
2002.
4. TRANSFERABILITY. This Option is not transferable otherwise than by
will or the laws of descent and distribution and during the lifetime of the
Optionee is exercisable only by the Optionee.
5. TERMINATION OF OPTION. Any unexercised portion of this Option shall
automatically and without notice terminate and become null and void.
6. NO RIGHT TO CONTINUED EMPLOYMENT. This Option shall not confer upon
the Optionee any right to employment.
7. SHARE CERTIFICATES. Upon each exercise of any Option, the Company
will cause one or more stock certificates evidencing the Optionee's ownership of
Shares to be issued to the Optionee. The Company shall cause the following
legend to be placed upon each stock certificate representing the Shares:
"The shares of stock represented by this Certificate have
been acquired directly or indirectly from the Issuer or an
affiliate of the Issuer without being registered under the
Securities Act of 1933, as amended ("Act"), or the
securities laws of any state or other jurisdiction,
including the Florida Securities Act, and are restricted
securities as that term is defined under Rule 144
promulgated under the Act. These shares may not be sold,
transferred, pledged, hypothecated or otherwise disposed of
in any manner ("Transfer") unless they are registered under
such Act and the securities laws of all applicable states
and other jurisdictions or unless the request for Transfer
is accompanied by a favorable opinion of counsel
<PAGE>
satisfactory to the Issuer, stating that such Transfer will
not result in a violation of such laws."
8. LAW GOVERNING. This Agreement shall be governed in accordance with
and governed by the internal laws of the State of Delaware.
9. INTERPRETATION. The Optionee accepts this Option subject to all the
terms and provisions of this Agreement. The undersigned Optionee hereby accepts
as binding, conclusive and final all decisions or interpretations of the Company
upon any questions arising under this Agreement.
10. NOTICES. Any notice under this Agreement shall be in writing and
shall be deemed to have been duly given when delivered personally or when
deposited in the United States mail, registered, postage prepaid, and addressed,
in the case of the Company, to the Company's Secretary at 1343 Main Street, 7th
Floor, Sarasota, Florida 34236, or if the Company should move its principal
office, to such principal office, and, in the case of the Optionee, to the
Optionee's last permanent address as shown on the Company's records, subject to
the right of either party to designate some other address at any time hereafter
in a notice satisfying the requirements of this Section.
COMPANY:
DENTAL CARE ALLIANCE, INC.
By:
-------------------------------
OPTIONEE:
---------------------------------
David P. Nichols
2
EXHIBIT 10.15
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED OR OTHERWISE
DISPOSED OF, UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THE SECURITIES ACT
OR AN OPINION OF COUNSEL IS OBTAINED STATING THAT SUCH DISPOSITION IS IN
COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION.
AS OF _____ __, 1997
DENTAL CARE ALLIANCE, INC.
(INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE)
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
NO. WP-1
FOR VALUE RECEIVED, DENTAL CARE ALLIANCE, INC., a Delaware corporation
(the "Company"), hereby certifies that THE NASSAU GROUP, INC. or registered
assigns (the "Holder") is entitled, subject to the provisions of this Warrant,
to purchase from the Company, fully paid and non-assessable shares (the "Warrant
Shares") of Common Stock for a price of $92,355.00 (the "Exercise Price") or $
per share.
The term "Common Stock" means the Common Stock, par value $.01 per
share, of the Company as constituted on the date the Company completes an
initial public offering (the "Base Date"). The number of shares of Common Stock
to be received upon the exercise of this Warrant and the Exercise Price may be
adjusted from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter referred to as "Warrant Stock." The term "Other Securities" means
any other equity or debt securities that may be issued by the Company in
addition thereto or in substitution for the Warrant Stock. The term "Company"
means and includes the corporation named above as well as (i) any immediate or
more remote successor corporation resulting from the merger or consolidation of
such corporation (or any immediate or more remote successor corporation of such
corporation) with another corporation, or (ii) any corporation to which such
corporation (or any immediate or more remote successor corporation of such
corporation) has transferred its property or assets as an entirety or
substantially as an entirety.
<PAGE>
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute an additional contractual obligation on
the part of the Company, whether or not this Warrant so lost, stolen, destroyed
or mutilated shall be at any time enforceable by anyone.
The Holder agrees with the Company that this Warrant is issued, and all
the rights hereunder shall be held subject to, all of the conditions,
limitations and provisions set forth herein.
1. EXERCISE OF WARRANT. This Warrant may be exercised in whole or in
part at any time, or from time to time during the period commencing on the date
hereof and expiring 5:00 p.m. Eastern Time on _____ __, 1998 (the "Expiration
Date"), by presentation and surrender of this Warrant to the Company at its
principal office, or at the office of its stock transfer agent, if any, with the
Warrant Exercise Form attached hereto duly executed and accompanied by payment
(either in cash or by certified or official bank check or delivery by Holder of
a promissory note, payable to the order of the Company) of the Exercise Price
for the number of shares specified in such form and instruments of transfer, if
appropriate, duly executed by the Holder or his or her duly authorized attorney.
If this Warrant should be exercised in part only, the Company shall, upon
surrender of this Warrant for cancellation, execute and deliver a new Warrant
evidencing the rights of the Holder thereof to purchase the balance of the
shares purchasable hereunder. Upon receipt by the Company of this Warrant,
together with the Exercise Price, at its office, or by the stock transfer agent
of the Company at its office, in proper form for exercise, the Holder shall be
deemed to be the holder of record of the shares of Common Stock issuable upon
such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such shares of Common
Stock shall not then be actually delivered to the Holder. The Company shall pay
any and all documentary stamp or similar issue taxes payable in respect of the
issue or delivery of shares of Common Stock on exercise of this Warrant,
provided, that the Company shall not be required to pay any tax that may be
payable in respect of any transfer that may be involved in the issuance and
delivery of any certificate in a name other than that of the Holder of the
Warrant exercised.
2. RESERVATION OF SHARES. The Company will at all times reserve for
issuance and delivery upon exercise of this Warrant all shares of Common Stock
or other shares of capital stock of the Company (and Other Securities) from time
to time receivable upon exercise of this Warrant. All such shares (and Other
Securities) shall be duly authorized and, when issued upon such exercise, shall
be validly issued, fully paid and non-assessable and free of all preemptive
rights.
3. FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant, but the
Company shall pay the Holder an
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<PAGE>
amount equal to the fair market value of such fractional share of Common Stock
in lieu of each fraction of a share otherwise called for upon any exercise of
this Warrant. For purposes of this Warrant, the fair market value of a share of
Common Stock shall be determined as follows:
(a) If the Common Stock is listed on a National Securities
Exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the NASDAQ system, the current market value shall be the last
reported sale price of the Common Stock on such exchange or system on the last
business day prior to the date of exercise of this Warrant or if no such sale is
made on such day, the average of the closing bid and asked prices for such day
on such exchange or system; or
(b) If the Common Stock is not so listed or admitted to
unlisted trading privileges, the current market value shall be the mean of the
last reported bid and asked prices reported by the National Quotation Bureau,
Inc. on the last business day prior to the date of the exercise of this Warrant;
or
(c) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported, the
current market value shall be an amount, not less than book value thereof as at
the end of the most recent fiscal year of the Company ending prior to the date
of the exercise of the Warrant, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
4. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other Warrants of different denominations, entitling the
Holder or Holders thereof to purchase in the aggregate the same number of shares
of Common Stock purchasable hereunder. Upon surrender of this Warrant to the
Company or at the office of its stock transfer agent, if any, with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax, the Company shall, without charge, execute and deliver a new
Warrant in the name of the assignee named in such instrument of assignment and
this Warrant shall promptly be cancelled. This Warrant may be divided or
combined with other Warrants that carry the same rights upon presentation hereof
at the office of the Company or at the office of its stock transfer agent, if
any, together with a written notice specifying the names and denominations in
which new Warrants are to be issued and signed by the Holder hereof.
5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or in
equity, and the rights of the Holder are limited to those expressed in this
Warrant.
6. ANTI-DILUTION PROVISIONS.
6.1 ADJUSTMENT FOR RECAPITALIZATION. If the Company shall at
any time subdivide its outstanding shares of Common Stock (or Other Securities
at the time receivable
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<PAGE>
upon the exercise of the Warrant) by recapitalization, reclassification or
split-up thereof, or if the Company shall declare a stock dividend or distribute
shares of Common Stock to its stockholders, the number of shares of Common Stock
subject to this Warrant immediately prior to such subdivision shall be
proportionately increased and the Exercise Price shall be proportionately
decreased, and if the Company shall at any time combine the outstanding shares
of Common Stock by recapitalization, reclassification or combination thereof,
the number of shares of Common Stock or Other Securities subject to this Warrant
immediately prior to such combination shall be proportionately decreased and the
Exercise Price shall be proportionately increased. Any such adjustments pursuant
to this Section 6.1 shall be effective at the close of business on the effective
date of such subdivision or combination or if any adjustment is the result of a
stock dividend or distribution then the effective date for such adjustment based
thereon shall be the record date therefor.
6.2 ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER,
ETC. In case of any reorganization of the Company (or any other corporation, the
securities of which are at the time receivable on the exercise of this Warrant)
after the Base Date or in case after such date the Company (or any such other
corporation) shall consolidate with or merge into another corporation or convey
all or substantially all of its assets to another corporation, then, and in each
such case, the Holder of this Warrant upon the exercise thereof as provided in
Section 1 at any time after the consummation of such reorganization,
consolidation, merger or conveyance, shall be entitled to receive, in lieu of
the securities and property receivable upon the exercise of this Warrant prior
to such consummation, the securities or property to which such Holder would have
been entitled upon such consummation if such Holder had exercised this Warrant
immediately prior thereto; in each such case, the terms of this Warrant shall be
applicable to the securities or property receivable upon the exercise of this
Warrant after such consummation.
6.3 FURTHER ASSURANCES. While this Warrant is outstanding,
the Company (a) will not permit the par value, if any, of the shares of Common
Stock receivable upon the exercise of this Warrant to be above the amount
payable therefor upon such exercise and (b) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
or sell fully paid and non-assessable shares of capital stock upon the exercise
of this Warrant.
6.4 CERTIFICATE AS TO ADJUSTMENTS. In each case of an
adjustment in the number of shares of Warrant Stock or Other Securities
receivable on the exercise of this Warrant, the Company at its expense will
promptly compute such adjustment in accordance with the terms of this Warrant
and prepare a certificate executed by an executive officer of the Company
setting forth such adjustment and showing in detail the facts upon which such
adjustment is based. The Company will forthwith mail a copy of each such
certificate to the Holder.
- 4 -
<PAGE>
6.5 NOTICES OF RECORD DATE, ETC. In case:
(a) the Company shall take a record of the
holders of its Common Stock (or Other Securities at the time receivable upon the
exercise of the Warrant) for the purpose of entitling them to receive any
dividend (other than a cash dividend at the same rate as the rate of the last
cash dividend theretofore paid) or other distribution, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any other
securities, or to receive any other right; or
(b) of any capital reorganization of the Company,
any reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation, or any conveyance of all
or substantially all of the assets of the Company to another corporation; or
(c) of any voluntary or involuntary dissolution,
liquidation or winding up of the Company,
then, and in each such case, the Company shall mail or cause to be mailed to
each Holder of the Warrant at the time outstanding a notice specifying, as the
case may be, (i) the date on which a record is to be taken for the purpose of
such dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, or (ii) the date on which such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding up is to take place, and the time, if any,
to be fixed, as to which the holders of record of Common Stock (or such other
securities at the time receivable upon the exercise of the Warrant) shall be
entitled to exchange their shares of Common Stock (or such other securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding up. Such notice shall be mailed at least 20 days prior to the date
therein specified and the Warrant may be exercised prior to said date during the
term of the Warrant.
7. TRANSFER TO COMPLY WITH THE SECURITIES ACT. Notwithstanding any
other provision contained herein, this Warrant and any Warrant Stock or Other
Securities may not be sold, transferred, pledged, hypothecated or otherwise
disposed of except as follows: (a) to a person who, in the opinion of counsel to
the Company, is a person to whom this Warrant or the Warrant Stock or Other
Securities may legally be transferred without registration and without the
delivery of a current prospectus under the Securities Act with respect thereto
and then only against receipt of an agreement of such person to comply with the
provisions of this Section 7 with respect to any resale or other disposition of
such securities; or (b) to any person upon delivery of a prospectus then meeting
the requirements of the Securities Act relating to such securities and the
offering thereof for such sale or disposition, and thereafter to all successive
assignees.
8. LEGEND. Unless the shares of Warrant Stock or Other Securities have
been registered under the Securities Act, upon exercise of any of the Warrants
and the issuance of any
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<PAGE>
of the shares of Warrant Stock or Other Securities, all certificates
representing such securities shall bear on the face thereof substantially the
following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be sold, offered for sale, assigned, transferred or
otherwise disposed of, unless registered pursuant to the
provisions of that Act or unless an opinion of counsel to the
Corporation is obtained stating that such disposition is in
compliance with an available exemption from such registration.
9. REGISTRATION RIGHTS.
(a) RIGHT OF HOLDER TO INCLUDE SHARES. Whenever the Company
proposes to register any of its Common Stock under the Securities Act on Form
S-1, S-2, S-3 or any similar form then in effect (a "Registration Statement"),
whether or not for its own account, the Company shall, except with respect to
the initial public offering by the Company of any class of equity securities
give written notice thereof to the Holder at least 30 days before such filing,
if practicable (but in no event less than 20 days before such filing), offering
the Holder the opportunity to register on such Registration Statement such
number of Shares as the Holder may request in writing, subject to the provisions
of Section 9(b), not later than 10 days before such filing (a "Piggyback
Registration"). Upon receipt by the Company of any such request, the Company
shall use reasonable efforts to, or in the case of an offering that is
underwritten (an "Underwritten Registration"), to cause such Shares to be
included in such Registration Statement (or in a separate Registration Statement
concurrently filed) and to cause such Registration Statement to become effective
with respect to such Shares. If the Company's registration is to be effected
pursuant to an Underwritten Offering, Shares registered pursuant to this Section
9 shall be distributed in accordance with such offering. Notwithstanding the
foregoing, if at any time after giving written notice of its intention to
register Shares and before the effectiveness of the Registration Statement filed
in connection with such registration, the Company determines for any reason
either not to effect such registration or to delay such registration, the
Company may, at its election, by delivery of a written notice to the Holder (i)
in the case of a determination not to effect registration, relieve itself of its
obligation to register the Shares in connection with such registration or (ii)
in the case of a determination to delay registration, delay the registration of
the Shares for the same period as the delay in the registration of such other
shares of Common Stock. If the Holder requests inclusion in a registration
pursuant to this Section 9, he may, at any time before the effective date of the
Registration Statement relating to such registration, revoke such request by
delivering written notice of such revocation to the Company (which notice shall
be effective only upon receipt by the Company); PROVIDED, HOWEVER, that if the
Company, in consultation with its financial and legal advisors, determines that
such revocation would materially delay the registration or otherwise require a
recirculation of the prospectus contained in the Registration Statement, then
the Holder shall have no right to so revoke his request.
- 6 -
<PAGE>
(b) UNDERWRITTEN REGISTRATION.
(i) Notwithstanding anything herein to the
contrary, the Holder may not participate in any Underwritten
Registration hereunder unless he (a) agrees to sell the Shares on the
same terms and conditions provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangement
and (b) accurately completes and executes in a timely manner all
questionnaires, powers of attorney, indemnities, custody agreements,
underwriting agreements and other documents required under the terms of
such underwriting arrangements. Notwithstanding (a) above, the Holder
shall be required to pay his proportionate share of any underwriting
discount and related expenses of the underwriters borne by other
stockholders (as opposed to the Company) with respect to the
registration and offering of the Shares only if the Registration
Statement relating to such registration is declared effective, and
shall be reimbursed for any such amounts paid if the Registration
Statement does not become effective or if there is a suspension of its
effectiveness. In addition, the Holder shall be responsible for any
legal, accounting or other professional fees and expenses incurred by
the Holder.
(ii) If any Piggyback Registration is in the form
of an Underwritten Offering, the managing underwriter or underwriters
and any additional investment bankers and managers to be used in
connection with such registration shall be selected by the Company
(subject to any separate agreement with the holders on behalf of which
a secondary Underwritten Offering is being made.
(c) PRIORITY IN PIGGYBACK REGISTRATION.
(i) If the shares of Common Stock to be included in
a Piggyback Registration are to be sold in one or more Underwritten
Offerings and the managing underwriter or underwriters advise the
Company in writing that the total amount of shares of Common Stock
requested to be included in such offering would exceed the maximum
amount of securities which can be marketed at a price reasonably
related to the current fair market value of such securities without
adversely affecting such offering (the "Underwriters' Maximum Number"),
then the Company will so notify the Holder and will be required to
include in such registration, to the extent of the Underwriters'
Maximum Number: FIRST, if the Underwritten Registration is an
underwritten registration on behalf of the stockholders of the Company,
the shares of Common Stock requested by such stockholders to be
included in such registration, PRO RATA among such stockholders on the
basis of the number of shares of Common Stock held by such
stockholders; SECOND, any shares of Common Stock that the Company
proposes to sell for its own account; and THIRD, other securities
requested to be included in such registration; PROVIDED, HOWEVER, that
if the Underwritten Registration is an underwritten registration on
behalf of the Company, the Company will include in such registration,
in lieu of the first and second priorities described above, to the
extent of the Underwriters' Maximum Number:
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<PAGE>
FIRST, the shares of Common Stock the Company proposes to sell and
SECOND, the shares of Common Stock requested by the stockholders of
the Company to be included in such registration, PRO RATA among such
stockholders on the basis of the number of shares of Common Stock held
by such stockholders.
(ii) If any of the Shares to be included in a
Piggyback Registration are to be sold in a non-underwritten offering,
but the Company, after consultation with an investment banking firm of
nationally recognized standing (including a regional firm of recognized
standing), reasonably determines the amount of shares of Common Stock
to be included in such registration exceeds the amount of securities
that can be sold within a price range acceptable to the Company or the
initiating holders and notifies all holders of shares of Common Stock
requesting inclusion in such registration of such determination
("Company's Maximum Number"), then the Company will be required to
include in such registration, to the extent of the Company's Maximum
Number, shares of Common Stock in accordance with the priorities set
forth in paragraph (i) above.
(d) DELIVERY OF REGISTRATION STATEMENT. In connection with a
Piggyback Registration, the Company shall deliver to the Holder, its counsel and
the underwriters, if any, without charge, at least one signed copy of the
Registration Statement, upon request, and such number of conformed copies
thereof and such number of copies of the Prospectus (including the preliminary
Prospectus) included in such Registration Statement and any amendment or
supplement thereto or any other document as such persons may reasonably request
and as promptly as practicable after the filing with the Securities and Exchange
Commission of any document which is incorporated by reference into a
Registration Statement, the copy of such document.
(e) EQUITY HOLDER INFORMATION. If Shares owned by the Holder
are included in a Piggyback Registration, the Holder shall furnish promptly to
the Company such information regarding himself and the distribution of such
securities as the Company may from time to time reasonably request in writing in
order that the Company may comply with applicable securities laws.
(f) INDEMNIFICATION. In the event of any registration of
Shares under the Securities Act pursuant to this Agreement, the Company shall
indemnify and hold harmless the Holder against any losses, claims, damages or
liabilities, joint or several, to which any of such persons may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or action in respect thereof) arise out of or are based upon an
untrue statement of a material fact contained in any registration statement
under which such Shares were registered under the Securities Act, any final
prospectus contained therein, or any amendment or supplement thereto, or any
document prepared and/or furnished by the Company incident to the registration
or qualification of any Shares, or arise out of or are based upon the omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading or, with respect to any final
prospectus, necessary to make the statements therein
- 8 -
<PAGE>
in light of the circumstances under which they were made, not misleading, or any
violations by the Company of the Securities Act or state securities or "blue
sky" laws applicable to the Company relating to action or inaction required of
the Company in connection with such registration or qualification under such
state securities or blue sky laws; and shall reimburse such seller for any legal
or any other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company shall not be liable to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
said registration statement, said final prospectus or said amendment or
supplement or any document incident to the registration or qualification of any
Shares in reliance upon and in conformity with information furnished to the
Company by the Holder for use in preparation thereof. Before Shares held by the
Holder shall be included in any registration pursuant to this Agreement, the
Holder shall have agreed to indemnify and hold harmless (in the same manner and
to the same extent as set forth in this Section 9(g) for the indemnification of
the Holder by the Company) the Company, each director of the Company, each
officer of the Company who shall sign such registration statement and any person
who controls the Company within the meaning of the Securities Act, with respect
to any untrue statement or omission from such registration statement or final
prospectus contained therein or any amendment or supplement thereto, if such
untrue statement or omission was (i) made in reliance upon and in conformity
with information furnished to the Company by the Holder for use in the
preparation of such registration statement, final prospectus or amendment or
supplement or (ii) contained in any Registration Statement which was utilized by
the Holder or any controlling person or affiliate of the Holder either (A) on
any date which is in excess of 45 days after the date of the Prospectus included
therein, or (B) after the Holder was notified that such Registration Statement
contained an untrue statement of a material fact or omitted to state any
material fact. Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in this Section 9(g),
such indemnified party will, if a claim in respect thereof is made against any
indemnifying party, given written notice to the latter of such claim and/or the
commencement of such action. In case any such action is brought against an
indemnified party, the indemnifying party will be entitled to participate in and
assume the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election to assume the defense thereof, the
indemnifying party shall be responsible for any legal or other expenses
subsequently incurred by the latter in connection with the defense thereof,
provided that if any indemnified party shall have reasonably concluded that
there may be one or more legal defenses available to such indemnified party
which conflict in any material respect with those available to the indemnifying
party, or that such claim or litigation involves or could have an effect upon
matters beyond the scope of the indemnity agreement provided in this Section
9(g), such indemnifying party shall reimburse such indemnified party and any
person controlling such indemnified party for that portion of the fees and
expenses of any counsel retained by the indemnified party which are reasonably
related to the matters covered by the indemnity agreement provided in this
Section 9(g). The indemnify party shall not make any settlement of any claims
indemnified against thereunder without the
- 10 -
<PAGE>
written consent of the indemnified party or parties, which consent shall not be
unreasonably withheld.
(g) CERTAIN LIMITATIONS ON REGISTRATION RIGHTS.
Notwithstanding the other provisions of this Agreement, the Company shall not be
obligated to register the Shares of Holder if, in the opinion of counsel to the
Company, the sale or other disposition of all of the Holders' Shares may be
effected without registering such Restricted Shares under the Securities Act.
10. NOTICES. All notices required hereunder shall be in writing and
shall be deemed given when telegraphed, delivered personally or within two days
after mailing when mailed by certified or registered mail, return receipt
requested, to the Company at its principal office, or to the Holder at the
address set forth on the record books of the Company, or at such other address
of which the Company or the Holder has been advised by notice hereunder.
11. APPLICABLE LAW. The Warrant is issued under and shall for all
purposes be governed by and construed in accordance with the laws of the State
of Florida, without giving effect to the choice of law rules thereof.
IN WITNESS HEREOF, the Company has caused this Warrant to be signed on
its behalf, in its corporate name, by its duly authorized officer, all as of the
day and year first above written.
DENTAL CARE ALLIANCE, INC.
By:
-------------------------------------
Name: Steven R. Matzkin
Title: President and Chief Executive
Officer
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<PAGE>
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing _______ shares of Common Stock of Dental
Care Alliance, Inc., a Delaware corporation, and hereby makes payment of
$____________ in payment therefor.
--------------------------------
Signature
--------------------------------
Signature, if jointly held
--------------------------------
Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
(if other than to the registered holder of the within Warrant)
Name
---------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Social Security or
Taxpayer Identification Number
-------------------------------------------------
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<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED,
------------------------------------------------------------
hereby sells, assigns and transfers unto
Name
------------------------------------------------------------------------
(Please typewrite or print in block letters)
the right to purchase Common Stock of Dental Care Alliance, Inc., a Delaware
corporation, represented by this Warrant to the extent of shares as to which
such right is exercisable and does hereby irrevocably constitute and appoint
Attorney, to transfer the same on the books of the Company with full power of
substitution in the premises.
DATED: ____________, _____.
------------------------------------
Signature
------------------------------------
Signature, if jointly held
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EXHIBIT 10.16
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED OR OTHERWISE
DISPOSED OF, UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THE SECURITIES ACT
OR AN OPINION OF COUNSEL IS OBTAINED STATING THAT SUCH DISPOSITION IS IN
COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION.
AS OF __, 199__
DENTAL CARE ALLIANCE, INC.
(INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE)
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
NO. WP-2
FOR VALUE RECEIVED, DENTAL CARE ALLIANCE, INC., a Delaware corporation
(the "Company"), hereby certifies that THE NASSAU GROUP, INC. or registered
assigns (the "Holder") is entitled, subject to the provisions of this Warrant,
to purchase from the Company, ___fully paid and non-assessable shares (the
"Warrant Shares") of Common Stock for a price of $350,000.00 (the "Exercise
Price") or $___ per share.
The term "Common Stock" means the Common Stock, par value $.01 per
share, of the Company as constituted on the date the Company completes an
initial public offering (the "Base Date"). The number of shares of Common Stock
to be received upon the exercise of this Warrant and the Exercise Price may be
adjusted from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter referred to as "Warrant Stock." The term "Other Securities" means
any other equity or debt securities that may be issued by the Company in
addition thereto or in substitution for the Warrant Stock. The term "Company"
means and includes the corporation named above as well as (i) any immediate or
more remote successor corporation resulting from the merger or consolidation of
such corporation (or any immediate or more remote successor corporation of such
corporation) with another corporation, or (ii) any corporation to which such
corporation (or
<PAGE>
any immediate or more remote successor corporation of such corporation) has
transferred its property or assets as an entirety or substantially as an
entirety.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute an additional contractual obligation on
the part of the Company, whether or not this Warrant so lost, stolen, destroyed
or mutilated shall be at any time enforceable by anyone.
The Holder agrees with the Company that this Warrant is issued, and all
the rights hereunder shall be held subject to, all of the conditions,
limitations and provisions set forth herein.
1. EXERCISE OF WARRANT. This Warrant may be exercised in whole or in
part at any time, or from time to time during the period commencing on the date
hereof and expiring 5:00 p.m. Eastern Time on ___________ (the "Expiration
Date"), by presentation and surrender of this Warrant to the Company at its
principal office, or at the office of its stock transfer agent, if any, with the
Warrant Exercise Form attached hereto duly executed and accompanied by payment
(either in cash or by certified or official bank check or delivery by Holder of
a promissory note, payable to the order of the Company) of the Exercise Price
for the number of shares specified in such form and instruments of transfer, if
appropriate, duly executed by the Holder or his or her duly authorized attorney.
If this Warrant should be exercised in part only, the Company shall, upon
surrender of this Warrant for cancellation, execute and deliver a new Warrant
evidencing the rights of the Holder thereof to purchase the balance of the
shares purchasable hereunder. Upon receipt by the Company of this Warrant,
together with the Exercise Price, at its office, or by the stock transfer agent
of the Company at its office, in proper form for exercise, the Holder shall be
deemed to be the holder of record of the shares of Common Stock issuable upon
such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such shares of Common
Stock shall not then be actually delivered to the Holder. The Company shall pay
any and all documentary stamp or similar issue taxes payable in respect of the
issue or delivery of shares of Common Stock on exercise of this Warrant,
provided, that the Company shall not be required to pay any tax that may be
payable in respect of any transfer that may be involved in the issuance and
delivery of any certificate in a name other than that of the Holder of the
Warrant exercised.
2. RESERVATION OF SHARES. The Company will at all times reserve for
issuance and delivery upon exercise of this Warrant all shares of Common Stock
or other shares of capital stock of the Company (and Other Securities) from time
to time receivable upon exercise of this Warrant. All such shares (and Other
Securities) shall be duly authorized and, when issued upon such exercise, shall
be validly issued, fully paid and non-assessable and free of all preemptive
rights.
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<PAGE>
3. FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant, but the
Company shall pay the Holder an amount equal to the fair market value of such
fractional share of Common Stock in lieu of each fraction of a share otherwise
called for upon any exercise of this Warrant. For purposes of this Warrant, the
fair market value of a share of Common Stock shall be determined as follows:
(a) If the Common Stock is listed on a National Securities
Exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the NASDAQ system, the current market value shall be the last
reported sale price of the Common Stock on such exchange or system on the last
business day prior to the date of exercise of this Warrant or if no such sale is
made on such day, the average of the closing bid and asked prices for such day
on such exchange or system; or
(b) If the Common Stock is not so listed or admitted to
unlisted trading privileges, the current market value shall be the mean of the
last reported bid and asked prices reported by the National Quotation Bureau,
Inc. on the last business day prior to the date of the exercise of this Warrant;
or
(c) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported, the
current market value shall be an amount, not less than book value thereof as at
the end of the most recent fiscal year of the Company ending prior to the date
of the exercise of the Warrant, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
4. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other Warrants of different denominations, entitling the
Holder or Holders thereof to purchase in the aggregate the same number of shares
of Common Stock purchasable hereunder. Upon surrender of this Warrant to the
Company or at the office of its stock transfer agent, if any, with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax, the Company shall, without charge, execute and deliver a new
Warrant in the name of the assignee named in such instrument of assignment and
this Warrant shall promptly be cancelled. This Warrant may be divided or
combined with other Warrants that carry the same rights upon presentation hereof
at the office of the Company or at the office of its stock transfer agent, if
any, together with a written notice specifying the names and denominations in
which new Warrants are to be issued and signed by the Holder hereof.
5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or in
equity, and the rights of the Holder are limited to those expressed in this
Warrant.
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<PAGE>
6. ANTI-DILUTION PROVISIONS.
6.1 ADJUSTMENT FOR RECAPITALIZATION. If the Company shall at any time
subdivide its outstanding shares of Common Stock (or Other Securities at the
time receivable upon the exercise of the Warrant) by recapitalization,
reclassification or split-up thereof, or if the Company shall declare a stock
dividend or distribute shares of Common Stock to its stockholders, the number of
shares of Common Stock subject to this Warrant immediately prior to such
subdivision shall be proportionately increased and the Exercise Price shall be
proportionately decreased, and if the Company shall at any time combine the
outstanding shares of Common Stock by recapitalization, reclassification or
combination thereof, the number of shares of Common Stock or Other Securities
subject to this Warrant immediately prior to such combination shall be
proportionately decreased and the Exercise Price shall be proportionately
increased. Any such adjustments pursuant to this Section 6.1 shall be effective
at the close of business on the effective date of such subdivision or
combination or if any adjustment is the result of a stock dividend or
distribution then the effective date for such adjustment based thereon shall be
the record date therefor.
6.2 ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC. In
case of any reorganization of the Company (or any other corporation, the
securities of which are at the time receivable on the exercise of this Warrant)
after the Base Date or in case after such date the Company (or any such other
corporation) shall consolidate with or merge into another corporation or convey
all or substantially all of its assets to another corporation, then, and in each
such case, the Holder of this Warrant upon the exercise thereof as provided in
Section 1 at any time after the consummation of such reorganization,
consolidation, merger or conveyance, shall be entitled to receive, in lieu of
the securities and property receivable upon the exercise of this Warrant prior
to such consummation, the securities or property to which such Holder would have
been entitled upon such consummation if such Holder had exercised this Warrant
immediately prior thereto; in each such case, the terms of this Warrant shall be
applicable to the securities or property receivable upon the exercise of this
Warrant after such consummation.
6.3 FURTHER ASSURANCES. While this Warrant is outstanding, the
Company (a) will not permit the par value, if any, of the shares of Common Stock
receivable upon the exercise of this Warrant to be above the amount payable
therefor upon such exercise and (b) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
or sell fully paid and non-assessable shares of capital stock upon the exercise
of this Warrant.
6.4 CERTIFICATE AS TO ADJUSTMENTS. In each case of an adjustment in
the number of shares of Warrant Stock or Other Securities receivable on the
exercise of this Warrant, the Company at its expense will promptly compute such
adjustment in accordance with the terms of this Warrant and prepare a
certificate executed by an executive officer of the Company setting forth such
adjustment and showing in detail the facts upon which such adjustment is based.
The Company will forthwith mail a copy of each such certificate to the Holder.
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<PAGE>
6.5 NOTICES OF RECORD DATE, ETC. In case:
(a) the Company shall take a record of the holders
of its Common Stock (or Other Securities at the time receivable upon the
exercise of the Warrant) for the purpose of entitling them to receive any
dividend (other than a cash dividend at the same rate as the rate of the last
cash dividend theretofore paid) or other distribution, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any other
securities, or to receive any other right; or
(b) of any capital reorganization of the Company,
any reclassification of the capital stock of the Company, any consolidation
or merger of the Company with or into another corporation, or any conveyance of
all or substantially all of the assets of the Company to another corporation; or
(c) of any voluntary or involuntary dissolution,
liquidation or winding up of the Company, then, and in each such case, the
Company shall mail or cause to be mailed to each Holder of the Warrant at the
time outstanding a notice specifying, as the case may be, (i) the date on which
a record is to be taken for the purpose of such dividend, distribution or right,
and stating the amount and character of such dividend, distribution or right, or
(ii) the date on which such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding up is to take place, and
the time, if any, to be fixed, as to which the holders of record of Common Stock
(or such other securities at the time receivable upon the exercise of the
Warrant) shall be entitled to exchange their shares of Common Stock (or such
other securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding up. Such notice shall be mailed at least 20
days prior to the date therein specified and the Warrant may be exercised prior
to said date during the term of the Warrant.
7. TRANSFER TO COMPLY WITH THE SECURITIES ACT. Notwithstanding any
other provision contained herein, this Warrant and any Warrant Stock or Other
Securities may not be sold, transferred, pledged, hypothecated or otherwise
disposed of except as follows: (a) to a person who, in the opinion of counsel to
the Company, is a person to whom this Warrant or the Warrant Stock or Other
Securities may legally be transferred without registration and without the
delivery of a current prospectus under the Securities Act with respect thereto
and then only against receipt of an agreement of such person to comply with the
provisions of this Section 7 with respect to any resale or other disposition of
such securities; or (b) to any person upon delivery of a prospectus then meeting
the requirements of the Securities Act relating to such securities and the
offering thereof for such sale or disposition, and thereafter to all successive
assignees.
8. LEGEND. Unless the shares of Warrant Stock or Other Securities have
been registered under the Securities Act, upon exercise of any of the Warrants
and the issuance of any
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<PAGE>
of the shares of Warrant Stock or Other Securities, all certificates
representing such securities shall bear on the face thereof substantially the
following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be sold, offered for sale, assigned, transferred or
otherwise disposed of, unless registered pursuant to the
provisions of that Act or unless an opinion of counsel to the
Corporation is obtained stating that such disposition is in
compliance with an available exemption from such registration.
9. REGISTRATION RIGHTS.
(a) RIGHT OF HOLDER TO INCLUDE SHARES. Whenever the Company
proposes to register any of its Common Stock under the Securities Act on Form
S-1, S-2, S-3 or any similar form then in effect (a "Registration Statement"),
whether or not for its own account, the Company shall, except with respect to
the initial public offering by the Company of any class of equity securities
give written notice thereof to the Holder at least 30 days before such filing,
if practicable (but in no event less than 20 days before such filing), offering
the Holder the opportunity to register on such Registration Statement such
number of Shares as the Holder may request in writing, subject to the provisions
of Section 9(b), not later than 10 days before such filing (a "Piggyback
Registration"). Upon receipt by the Company of any such request, the Company
shall use reasonable efforts to, or in the case of an offering that is
underwritten (an "Underwritten Registration"), to cause such Shares to be
included in such Registration Statement (or in a separate Registration Statement
concurrently filed) and to cause such Registration Statement to become effective
with respect to such Shares. If the Company's registration is to be effected
pursuant to an Underwritten Offering, Shares registered pursuant to this Section
9 shall be distributed in accordance with such offering. Notwithstanding the
foregoing, if at any time after giving written notice of its intention to
register Shares and before the effectiveness of the Registration Statement filed
in connection with such registration, the Company determines for any reason
either not to effect such registration or to delay such registration, the
Company may, at its election, by delivery of a written notice to the Holder (i)
in the case of a determination not to effect registration, relieve itself of its
obligation to register the Shares in connection with such registration or (ii)
in the case of a determination to delay registration, delay the registration of
the Shares for the same period as the delay in the registration of such other
shares of Common Stock. If the Holder requests inclusion in a registration
pursuant to this Section 9, he may, at any time before the effective date of the
Registration Statement relating to such registration, revoke such request by
delivering written notice of such revocation to the Company (which notice shall
be effective only upon receipt by the Company); PROVIDED, HOWEVER, that if the
Company, in consultation with its financial and legal advisors, determines that
such revocation would materially delay the registration or otherwise require a
recirculation of the prospectus contained in the Registration Statement, then
the Holder shall have no right to so revoke his request.
- 6 -
<PAGE>
(b) UNDERWRITTEN REGISTRATION.
(i) Notwithstanding anything herein to the
contrary, the Holder may not participate in any Underwritten
Registration hereunder unless he (a) agrees to sell the Shares
on the same terms and conditions provided in any underwriting
arrangements approved by the persons entitled hereunder to
approve such arrangement and (b) accurately completes and
executes in a timely manner all questionnaires, powers of
attorney, indemnities, custody agreements, underwriting
agreements and other documents required under the terms of
such underwriting arrangements. Notwithstanding (a) above, the
Holder shall be required to pay his proportionate share of any
underwriting discount and related expenses of the underwriters
borne by other stockholders (as opposed to the Company) with
respect to the registration and offering of the Shares only if
the Registration Statement relating to such registration is
declared effective, and shall be reimbursed for any such
amounts paid if the Registration Statement does not become
effective or if there is a suspension of its effectiveness. In
addition, the Holder shall be responsible for any legal,
accounting or other professional fees and expenses incurred by
the Holder.
(ii) If any Piggyback Registration is in the form
of an Underwritten Offering, the managing underwriter or
underwriters and any additional investment bankers and
managers to be used in connection with such registration shall
be selected by the Company (subject to any separate agreement
with the holders on behalf of which a secondary Underwritten
Offering is being made.
(c) PRIORITY IN PIGGYBACK REGISTRATION.
(i) If the shares of Common Stock to be included in
a Piggyback Registration are to be sold in one or more
Underwritten Offerings and the managing underwriter or
underwriters advise the Company in writing that the total
amount of shares of Common Stock requested to be included in
such offering would exceed the maximum amount of securities
which can be marketed at a price reasonably related to the
current fair market value of such securities without adversely
affecting such offering (the "Underwriters' Maximum Number"),
then the Company will so notify the Holder and will be
required to include in such registration, to the extent of the
Underwriters' Maximum Number: FIRST, if the Underwritten
Registration is an underwritten registration on behalf of the
stockholders of the Company, the shares of Common Stock
requested by such stockholders to be included in such
registration, PRO RATA among such stockholders on the basis of
the number of shares of Common Stock held by such
stockholders; SECOND, any shares of Common Stock that the
Company proposes to sell for its own account; and THIRD, other
securities requested to be included in such registration;
PROVIDED, HOWEVER, that if the Underwritten Registration is an
underwritten registration on behalf of the Company, the
Company will include in
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<PAGE>
such registration, in lieu of the first and second priorities
described above, to the extent of the Underwriters' Maximum
Number: FIRST, the shares of Common Stock the Company proposes to
sell and SECOND, the shares of Common Stock requested by the
stockholders of the Company to be included in such registration,
PRO RATA among such stockholders on the basis of the number of
shares of Common Stock held by such stockholders.
(ii) If any of the Shares to be included in a Piggyback
Registration are to be sold in a non-underwritten offering, but
the Company, after consultation with an investment banking firm
of nationally recognized standing (including a regional firm of
recognized standing), reasonably determines the amount of shares
of Common Stock to be included in such registration exceeds the
amount of securities that can be sold within a price range
acceptable to the Company or the initiating holders and notifies
all holders of shares of Common Stock requesting inclusion in
such registration of such determination ("Company's Maximum
Number"), then the Company will be required to include in such
registration, to the extent of the Company's Maximum Number,
shares of Common Stock in accordance with the priorities set
forth in paragraph (i) above.
(d) DELIVERY OF REGISTRATION STATEMENT. In connection with a
Piggyback Registration, the Company shall deliver to the Holder, its counsel and
the underwriters, if any, without charge, at least one signed copy of the
Registration Statement, upon request, and such number of conformed copies
thereof and such number of copies of the Prospectus (including the preliminary
Prospectus) included in such Registration Statement and any amendment or
supplement thereto or any other document as such persons may reasonably request
and as promptly as practicable after the filing with the Securities and Exchange
Commission of any document which is incorporated by reference into a
Registration Statement, the copy of such document.
(e) EQUITY HOLDER INFORMATION. If Shares owned by the Holder
are included in a Piggyback Registration, the Holder shall furnish promptly to
the Company such information regarding himself and the distribution of such
securities as the Company may from time to time reasonably request in writing in
order that the Company may comply with applicable securities laws.
(f) INDEMNIFICATION. In the event of any registration of
Shares under the Securities Act pursuant to this Agreement, the Company shall
indemnify and hold harmless the Holder against any losses, claims, damages or
liabilities, joint or several, to which any of such persons may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or action in respect thereof) arise out of or are based upon an
untrue statement of a material fact contained in any registration statement
under which such Shares were registered under the Securities Act, any final
prospectus contained therein, or any amendment or supplement thereto, or any
document prepared and/or furnished by the Company incident to the registration
or qualification of any Shares, or arise out of or are based upon the omission
to state
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<PAGE>
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading or, with respect to any final
prospectus, necessary to make the statements therein in light of the
circumstances under which they were made, not misleading, or any violations by
the Company of the Securities Act or state securities or "blue sky" laws
applicable to the Company relating to action or inaction required of the Company
in connection with such registration or qualification under such state
securities or blue sky laws; and shall reimburse such seller for any legal or
any other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company shall not be liable to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
said registration statement, said final prospectus or said amendment or
supplement or any document incident to the registration or qualification of any
Shares in reliance upon and in conformity with information furnished to the
Company by the Holder for use in preparation thereof. Before Shares held by the
Holder shall be included in any registration pursuant to this Agreement, the
Holder shall have agreed to indemnify and hold harmless (in the same manner and
to the same extent as set forth in this Section 9(g) for the indemnification of
the Holder by the Company) the Company, each director of the Company, each
officer of the Company who shall sign such registration statement and any person
who controls the Company within the meaning of the Securities Act, with respect
to any untrue statement or omission from such registration statement or final
prospectus contained therein or any amendment or supplement thereto, if such
untrue statement or omission was (i) made in reliance upon and in conformity
with information furnished to the Company by the Holder for use in the
preparation of such registration statement, final prospectus or amendment or
supplement or (ii) contained in any Registration Statement which was utilized by
the Holder or any controlling person or affiliate of the Holder either (A) on
any date which is in excess of 45 days after the date of the Prospectus included
therein, or (B) after the Holder was notified that such Registration Statement
contained an untrue statement of a material fact or omitted to state any
material fact. Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in this Section 9(g),
such indemnified party will, if a claim in respect thereof is made against any
indemnifying party, given written notice to the latter of such claim and/or the
commencement of such action. In case any such action is brought against an
indemnified party, the indemnifying party will be entitled to participate in and
assume the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election to assume the defense thereof, the
indemnifying party shall be responsible for any legal or other expenses
subsequently incurred by the latter in connection with the defense thereof,
provided that if any indemnified party shall have reasonably concluded that
there may be one or more legal defenses available to such indemnified party
which conflict in any material respect with those available to the indemnifying
party, or that such claim or litigation involves or could have an effect upon
matters beyond the scope of the indemnity agreement provided in this Section
9(g), such indemnifying party shall reimburse such indemnified party and any
person controlling such indemnified party for that portion of the fees and
expenses of any counsel retained by the indemnified party which are reasonably
related to the matters covered by the indemnity agreement provided in this
Section 9(g). The indemnify
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<PAGE>
party shall not make any settlement of any claims indemnified against thereunder
without the written consent of the indemnified party or parties, which consent
shall not be unreasonably withheld.
(g) CERTAIN LIMITATIONS ON REGISTRATION RIGHTS.
Notwithstanding the other provisions of this Agreement, the Company shall not be
obligated to register the Shares of Holder if, in the opinion of counsel to the
Company, the sale or other disposition of all of the Holders' Shares may be
effected without registering such Restricted Shares under the Securities Act.
10. NOTICES. All notices required hereunder shall be in writing and
shall be deemed given when telegraphed, delivered personally or within two days
after mailing when mailed by certified or registered mail, return receipt
requested, to the Company at its principal office, or to the Holder at the
address set forth on the record books of the Company, or at such other address
of which the Company or the Holder has been advised by notice hereunder.
11. APPLICABLE LAW. The Warrant is issued under and shall for all
purposes be governed by and construed in accordance with the laws of the State
of Florida, without giving effect to the choice of law rules thereof.
IN WITNESS HEREOF, the Company has caused this Warrant to be signed on
its behalf, in its corporate name, by its duly authorized officer, all as of the
day and year first above written.
DENTAL CARE ALLIANCE, INC.
By:
---------------------------------------
Name: Steven R. Matzkin
Title: President and Chief Executive
Officer
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<PAGE>
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise the within Warrant to the
extent of purchasing ____ shares of Common Stock of Dental Care Alliance, Inc.,
a Delaware corporation, and hereby makes payment of $____________ in payment
therefor.
-------------------------------
Signature
-------------------------------
Signature, if jointly held
-------------------------------
Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
(if other than to the registered holder of the within Warrant)
Name
---------------------------------------------------------------------------
(Please typewrite or print in block letters)
Address
------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Social Security or
Taxpayer Identification Number
-------------------------------------------------
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<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED,
------------------------------------------------------------
hereby sells, assigns and transfers unto
Name
---------------------------------------------------------------------------
(Please typewrite or print in block letters)
the right to purchase Common Stock of Dental Care Alliance, Inc., a Delaware
corporation, represented by this Warrant to the extent of shares as to which
such right is exercisable and does hereby irrevocably constitute and appoint
_____________________________________________________________________________
Attorney, to transfer the same on the books of the Company with full power of
substitution in the premises.
DATED: ____________, _____.
---------------------------------
Signature
---------------------------------
Signature, if jointly held
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<PAGE>
Dental Care Alliance, Inc.
1343 Main Street, 7th Floor
Sarasota, Florida 34236
August __, 1997
J. Francis Lavelle
The Nassau Group, Inc.
18 Kings Highway North
Westport, Connecticut 06880
Gentlemen:
This letter sets forth our agreement with respect to certain securities
of Dental Care Alliance, Inc. (the "Company") and other compensation to be
received by the Nassau Group, Inc. ("Nassau") in consideration for its
assistance to the Company in connection with an initial public offering of the
Company's Common Stock.
1. The Company shall, upon the consummation of an initial public
offering by the Company (an "IPO Transaction") at any time after the date
hereof, issue to Nassau a warrant, exercisable at Nassau's sole discretion for
five years from the date of grant (the "IPO Warrant A"), to purchase that number
of shares of Common Stock obtained by dividing $350,000 by the price per share
of the shares sold in the IPO Transaction. For IPO Warrant A, the exercise price
per share shall be the price per share of the shares sold in the IPO
Transaction. A copy of the form to be used for IPO Warrant A is attached hereto
as Exhibit A.
2. The Company shall, upon the consummation of an IPO Transaction at
any time after the date hereof, issue to Nassau a warrant, exercisable at
Nassau's sole discretion for one year from the date of grant (the "IPO Warrant
B"), to purchase that number of shares of Common Stock obtained after the
Company completes its stock split in connection with the IPO Transaction
equivalent to 650 shares of pre-stock split Common Stock. IPO Warrant A and IPO
Warrant B are hereinafter collectively referred to as the "IPO Warrants." For
IPO Warrant B, the exercise price per share shall be an amount equal to
$92,355.00 divided by the number of shares of Common Stock issued upon exercise
of IPO Warrant B. A copy of the form to be used for IPO Warrant B is attached
hereto as Exhibit B.
3. Upon the consummation of an IPO Transaction at any time during the
18 month period from the date hereof, the Company shall pay or cause to be paid
to Nassau a fee of $100,000 in cash (the "IPO Transaction Fee").
4. Both Nassau and Lavelle acknowledge and agree that they have no
further rights to purchase shares of Common Stock or other securities of the
Company, except as set forth herein. Each of Nassau and Lavelle also acknowledge
that they have no other rights to fees,
<PAGE>
J. Francis Lavelle
The Nassau Group, Inc.
August __, 1997
Page 2
except for the IPO Transaction Fee and for approximately $60,000 already
invoiced to the Company by Nassau. Each of Nassau and Lavelle also acknowledges
and agrees that he and it have no registration rights except for the piggyback
registration rights contained in those certain Equity Holders Agreements between
the Company on the one hand and each of Nassau and Lavelle on the other hand,
and the piggyback registration rights contained in the IPO Warrants, in the
latter case, if issued, it being the intent and agreement of the parties hereto
that there be no demand registration rights.
5. The Company hereby acknowledges that Nassau has assigned its right
to receive the IPO Warrant A and the IPO Warrant B to Lavelle. The Company
hereby consents to such assignment.
6. This Agreement supersedes all prior agreements, understandings,
negotiations and discussions, both written and oral, between the parties with
respect to the subject matter hereof.
If the foregoing correctly sets forth your understanding with respect
to the subject matter hereof, please so indicate by signing below.
Very truly yours,
Dental Care Alliance, Inc.
By:
----------------------------------------
Name: Dr. Steven R. Matzkin
Title: President and Chief Executive Officer
Acknowledged and Agreed:
The Nassau Group, Inc.
By:
-------------------------------
Name:
------------------------
Title:
-----------------------
- ----------------------------------
J. Francis Lavelle
EXHIBIT 10.18
STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT (this "AGREEMENT") is dated as of October 25,
1996, by and among Dental Care Alliance, Inc., a Delaware corporation (the
"COMPANY"), Steven R. Matzkin, D.D.S., an individual residing in the State of
Florida ("MATZKIN"), Curtis Lee Smith, Jr., an individual residing in the State
of New Jersey ("SMITH"), Robert F. Raucci, an individual residing in the State
of New York ("RAUCCI"') and Crescent International Holdings Limited, a British
Virgin Islands corporation ("CIHL" and together with Matzkin, Smith, Raucci and
CIHL, the "STOCKHOLDERS" and each individually, a "STOCKHOLDER") (Raucci and
CIHL are referred to collectively as the "INVESTORS" and are each, individually
an "INVESTOR").
RECITALS:
A. The Company is authorized to issue 200,000 shares of Common Stock, $0.01
par value per share ("Common Stock"), of which 53,550 shares are issued and
outstanding and 15,000 shares of Series A Convertible Preferred Stock, $0.01 par
value per share ("Series A Preferred"), of which no shares are issued and
outstanding.
B. Each of the Stockholders currently holds that number of shares of
capital stock as set forth opposite such Stockholder's name:
COMMON STOCK SERIES A PREFERRED
------------ ------------------
Matzkin 20,000 -
SRM 1993 Children's Trust 20,000 -
Smith 6,500 -
Raucci 167
CIHL 4,833
For purposes of the relations between Matzkin and the other Stockholders in
this Agreement only, Matzkin shall be deemed to own all interests of the Company
held by the SRM 1993 Children's Trust.
C. The Stockholders and the Company desire to promote their mutual interest
by imposing certain transfer restrictions on the shares of Common Stock and
Series A Preferred owned by the Stockholders (the "SHARES") and setting forth
their agreements and understandings regarding certain other matters relating to
the Shares and the Company.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and agreements hereinafter set forth, and for other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
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SECTION 1. DEFINITIONS. As used herein, the following terms shall have the
meanings herein specified.
(a) AFFILIATE. "Affiliate" of any Person means any person, corporation,
proprietorship, partnership, trust, limited liability company or other business
entity that, directly or indirectly, owns or controls, is under common ownership
or control with, or is owned or controlled by, such Person. For purposes of this
definition, "control" means the possession of the power to direct or cause the
direction of management and policies of such entity, whether through the
ownership of voting securities, by contract or otherwise.
(b) CERTIFICATE OF DESIGNATION. "Certificate of Designation" means that
certain Certificate of Designation Fixing Rights, Preferences, and Terms of the
Series A Convertible Preferred Stock With a Par Value of $0.01 per Share of
Dental Care Alliance, Inc., a Delaware Corporation.
(c) FIRST CLOSING. "First Closing" means the date of the funding of the
initial purchase of Series A Preferred by Investors pursuant to the Purchase
Documents.
(d) GAAP. "GAAP" means generally accepted accounting principles deemed
generally accepted under promulgations by the American Institute of Certified
Public Accountants.
(e) INVESTOR OPTION. "Investor Option" means that certain Option Agreement,
dated as of October 25, 1996, by and between CIHL and the Company.
(f) INVESTOR SUBSCRIPTION AGREEMENT. "Investor Subscription Agreement"
means that certain Subscription Agreement, dated as of October 2S, 1996, by and
among Raucci, CIHL and the Company.
(g) PERMITTED ISSUANCE. "Permitted Issuance" means an issuance of Common
Stock or Underlying Common Stock (or any options or rights to acquire any Common
Stock or any securities convertible or exchangeable for Common Stock) by the
Company, (i) to employees, directors and officers, pursuant to a stock option
plan approved by the Board of Directors (1,530 shares of Common Stock to be
initially reserved for issuance pursuant to such plan), (ii) pursuant to the
exercise of options, warrants or rights (including, without limitation, rights
of conversion) to the extent that such options, warrants or rights were issued
pursuant to item (i) above, (iii) pursuant to a stock dividend, stock split or
other reclassification of the Common Stock, or (iv)
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pursuant to the Smith Option, Smith Subscription Agreement, Investor Option or
Investor Subscription Agreement.
(h) PERSON. "Person" means an individual, a sole proprietorship, a
corporation, a partnership, a trust, a limited liability company, an
unincorporated organization or a government organization or an agency or
political subdivision thereof.
(i) PUBLIC OFFERING. "Public Offering" means a firm commitment underwritten
public offering of Common Stock by the Company pursuant to the Securities Act.
(j) PURCHASE DOCUMENTS. "Purchase Documents shall mean the Investor
Subscription Agreement and Investor Option, as the same are amended, modified,
supplemented or restated from time to time.
(k) QUALIFIED INITIAL PUBLIC OFFERING. "Qualified Initial Public Offering'
shall be as defined in Schedule 1 to the Certificate of Designation.
(l) RELATED PARTY. "Related Party" means, with respect to a particular
Stockholder, any Person who is the Stockholder's grandparent, parent, brother,
sister, spouse, child, aunt, uncle or cousin, whether the relation is through
blood or marriage, and each trust created for the benefit of one or more of such
Persons and each corporation, entity or other organization in which 100% of the
beneficial interest is held by such Person.
(m) SECURITIES ACT. "Securities Act" means the Securities Act of 1933, as
amended, or any federal statute or statutes which shall be enacted to take the
place of such Act, together with all rules and regulations promulgated
thereunder.
(n) SMITH OPTION. "Smith Option" means that certain Option Agreement, dated
as of January 3, 1994, between Curtis Lee Smith, Jr. and Golden Care Holdings,
L.C.
(o) SMITH SUBSCRIPTION AGREEMENT. "Smith Subscription Agreement" means that
certain Subscription Agreement, dated as of January 3, 1994, between Curtis Lee
Smith, Jr. and Golden Care Holdings, L.C.
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(p) TRANSFER. "Transfer" means any transfer, sale, assignment,
hypothecation, pledge, conveyance, gift, encumbrance or other disposition,
irrespective of whether any of the foregoing are effected voluntarily or
involuntarily, by operation of law or otherwise. Without limiting the foregoing,
in the event Smith, Raucci or CIHL shall become Bankrupt or Insolvent or shall
become subject to any involuntary transfer of such party's shares by legal
process, such party shall be deemed to have proposed to Transfer such party's
Shares.
(q) TRANSFEREE. "Transferee" means the Person desiring to effect a Transfer
with a Stockholder.
(r) "UNDERLYING COMMON STOCK" means (i) Common Stock issued or issuable
upon conversion of the Series A Preferred issued or issuable upon conversion of
any notes, (ii) Common Stock issued or issuable upon exercise of any other
security convertible into shares of Common Stock, (iii) Common Stock or any
other security convertible into shares of Common Stock which are obtained upon
the exercise of any option or warrant issued or granted by the Company and
constitute fully-diluted equity in accordance with GAAP, and (iv) any Common
Stock issued or issuable with respect to the securities referred to in clauses
(i) and (ii) above by way of stock dividend or stock split or in connection with
a combination of shares, recapitalization, merger, consolidation or other
reorganization. For purposes of this Agreement, any Person who holds Series A
Preferred will be deemed to be the holder of the Underlying Common Stock
obtainable upon conversion thereof regardless of any restriction or limitation
on the conversion of the Series A Preferred. As to any particular shares
constituting Underlying Common Stock, such shares will cease to be Underlying
Common Stock when they have been disposed of in any sale of the shares to the
public pursuant to an offering registered under the Securities Act or to the
public pursuant to the provisions of Rule 144 under the Securities Act (or any
similar provision then in force).
SECTION 2. GENERAL PROHIBITION. Prior to a Qualified Initial Public
Offering, a Stockholder may not, without the prior written consent of the
Company and the other Stockholders, Transfer to any Person any Shares owned by
such Stockholder other than in accordance with the terms of this Agreement. Any
purported or attempted Transfer of Shares by a Stockholder in violation of the
prohibition on Transfer of Shares contained herein shall be void AB INITIO and
of no force or effect.
SECTION 3. RESTRICTIONS ON TRANSFER OF SHARES.
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(a) Right of First Refusal.
i) Prior to a Qualified Initial Public Offering, any Stockholder (the
"TRANSFERRING STOCKHOLDER") who desires to Transfer more than 50\
of the Shares then owned by such Stockholder in one or a series of
related transactions to any Person other than a Related Party,
shall give written notice of the contemplated Transfer (the "OFFER
NOTICE") to the Company and to the other Stockholders (the "OTHER
STOCKHOLDERS"). The Offer Notice shall disclose in reasonable
detail the identity of the prospective transferee(s), the number
of Shares the Transferring Stockholder proposes to Transfer (the
"OFFERED SHARES") and the terms and conditions of the contemplated
Transfer. The Transferring Shareholder will not consummate any
Transfer until 45 days after the Offer Notice has been delivered
to the Company and to the Other Stockholders, unless all of the
Other Stockholders and the Company have notified the Transferring
Shareholder of their intent regarding the purchase of the Offered
Shares pursuant to SUBSECTION 3(a)(ii)-(iv) prior to the
expiration of such 45 day period.
ii) Each of the Other Stockholders may elect to purchase all (but not
less than all) of the Allotted Number (defined below) of the
Offered Shares, on the same terms and conditions as those set
forth in the Offer Notice, by delivering a written notice of such
election to the Transferring Stockholder and the other
Stockholders within 20 days after the Offer Notice has been
delivered to the Stockholders and the Company. The "ALLOTTED
NUMBER" shall mean, with respect to an individual Stockholder,
that portion of the Offered Shares (excluding any fractional
shares) equal to the product of (x) the quotient determined by
dividing the number of Common Stock and Underlying Common Stock
owned by such Stockholder by the aggregate number of Common Stock
and Underlying Common Stock owned by all of the Stockholders other
than the Transferring Stockholder and (y) the Offered Shares. Each
of the Other Stockholders who do not wish to purchase such
Stockholder's Allotted Number shall deliver a written notice of
such election to the Transferring Stockholder and the other
Stockholders within 14 days after the Offer Notice has been
delivered to the Stockholders and the Company. Failure of an Other
Stockholder to notify the Transferring Stockholder as provided
herein shall be deemed to be an election by such Other Stockholder
not to purchase such Other Stockholder's Allotted Number of
Offered Shares.
iii) If any of the Other Stockholders do not elect to purchase his or
its Allotted Number, each of the Other Stockholders desiring to
purchase Offered Shares in a number in excess of his or its
Allotted Number shall be
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entitled, within 5 days after such Stockholder receives written
notice of the other Stockholder's election not to purchase, to
purchase such proportion of those Offered Shares that remain thus
undisposed of, as the total number of shares of Common Stock and
Underlying Common Stock that he owns bears to the aggregate number
of shares of Common Stock and Underlying Common Stock owned by
those Other Stockholders desiring to purchase Offered Shares in
excess of their Allotted Numbers.
iv) The Transferring Stockholder shall notify the Company of any of
the Offered Shares not purchased by the Other Stockholders
pursuant to SUBSECTIONS 3(a)(ii)-(iii), and all of such shares
(but not less than all) may be purchased by the Company, on the
same terms and conditions as those set forth in the Offer Notice,
provided, that within 5 days after notice thereof was delivered to
the Company, the Company deliver a written notice of such election
to the Transferring Stockholder.
v) In the event that any or all of the Offered Shares are not
purchased by the Company, then such Offered Shares may be disposed
of, but only in accordance with the terms of the Offer Notice,
within ninety (90) days of the date thereof. In the event the
Offered Shares are not transferred to the transferee(s) named in
the Offer Notice within ninety (90) days of the Offer Notice and
in accordance with the terms of the Offer Notice, all restrictions
contained herein shall again be in full force and effect with
respect to the Offered Shares.
vi) The Company and the Stockholders agree that in the event that the
Transfer is one which is to be effected voluntarily by the
Transferring Stockholder, the purchase price per Share sold and
purchased pursuant to this Section shall be the price offered in a
Bona Fide Offer to a prospective transferee. As used herein, a
"BONA FIDE OFFER" from a Transferee must (i) irrevocable (subject
to standard sale conditions) and in writing and (ii) be an offer
that the Transferring Stockholder be willing to accept. The
Company and the Stockholders agree that in the event that the
Transfer is one which is to be effected involuntarily by the
Transferring Stockholder, the purchase price per Share sold and
purchased pursuant to this Section and the terms of payment shall
be as set forth in SCHEDULE 1.
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vii) Except as otherwise provided in this Agreement, the purchase price
for Shares sold and purchased pursuant to this Section shall be
paid to the Transferring Stockholder as provided in SCHEDULE 1.
viii)Shares Transferred by any Stockholder to a Related Party shall
remain subject to SECTION 3(a) and such transferee shall be deemed
a party to this Agreement for purposes of SECTION 3(a) and such
shares shall remain subject to SECTION 3(a).
ix) Shares transferred to Persons other than Related Parties in
accordance with the terms and conditions of this Agreement shall
no longer be subject to the provisions of this Agreement,
including, without limitation, any of the restrictions or benefits
contained herein.
(b) Investor Co-Sale Rights.
i) If Matzkin desires to Transfer any shares of Common Stock then
owned by him in one or a series of related transactions to any
person other than a Related Party and other than in connection
with a Qualified Initial Public Offering or a sale to the Other
Stockholders pursuant to SECTION 3(a), he shall give written
notice (the "SALE Notice") to each Investor. The Sale Notice shall
disclose in reasonable detail the identity of the prospective
transferee(s), the number of shares of Common Stock Matzkin
proposes to Transfer (the "MATZKIN SALE SHARES") and the terms and
conditions of the proposed Transfer. Matzkin will not consummate
any Transfer until the first to occur of (x) 45 days after the
Sale Notice has been given to the Investors or (y) 14 days after
the date on which the Investors have given Matzkin written notice
of their election to participate in the contemplated Transfer
under this SUBSECTION 3(b). If an Investor elects to participate
in such Transfer, the Investor shall first convert into Common
Stock that number of Series A Preferred necessary to obtain the
Matzkin Participation Amount. Upon conversion of the Investor's
Series A Preferred, the Investor shall be entitled to sell in the
contemplated Transfer, at the same price per share and on the same
terms, the Matzkin Participation Amount by delivering written
notice to Matzkin within 14 days after delivery of the Sale
Notice. Failure of an Investor to notify Matzkin as provided
herein shall be deemed an election by such Investor not to
exercise his or its rights hereunder.
In the event that the Matzkin Sale Shares constitute 10% or less of the
Common Stock then owned by Matzkin, the "MATZKIN PARTICIPATION AMOUNT" shall be
the number of shares of
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Common Stock equal to the product of (x) the quotient determined by dividing
the number of Common Stock and Underlying Common Stock owned by the Investor by
the aggregate number of Common Stock and Underlying Common Stock owned by the
Investor and Matzkin and (y) the Matzkin Sale Shares. In the event that the
Matzkin Sale Shares constitute more than 10% of the Common Stock then owned by
Matzkin, the "MATZKIN PARTICIPATION AMOUNT" shall be equal to the lesser of (x)
the Matzkin Sale Shares and (y) the Common Stock then owned by the Investor.
ii) If a Stockholder, other than Matzkin, owning 5% or more of the
Common Stock and Underlying Common Stock (a "5% Holder"), desires
to Transfer any of the Shares then owned by him in one or a series
of related transactions to any Person other than a Related Party
and other than in connection with a Qualified Initial Public
Offering, he shall give written notice (the "Sale Notice") to the
Investor. The Sale Notice shall disclose in reasonable detail the
identity of the prospective transferee(s), the number of Shares
the 5% Holder proposes to Transfer (the "CO-SALE SHARES") and the
terms and conditions of the proposed Transfer. The 5% Holder will
not consummate any Transfer until the first to occur of (x) 45
days after the Sale Notice has been given to the Investor or (y)
l4 days after the date on which the Investors have given the 5%
Holder written notice of their election to participate in the
contemplated Transfer under this SUBSECTION 3(b). Failure of an
Investor to notify the 5% Holder as provided herein shall be
deemed an election by such Investor not to exercise his or its
rights hereunder. If the Investor elects to participate in such
Transfer, the Investor shall first convert into Common Stock that
number of Series A Preferred necessary to obtain the 5% Holder
Participation Number (as defined below). Upon conversion of the
Investor's Series A Preferred, the Investor shall be entitled to
sell in the contemplated Transfer, at the same price per share and
on the same terms, the 5% Holder Participation Number by
delivering written notice to the 5% Holder within 14 days after
delivery of the Sale Notice.
The "5% HOLDER PARTICIPATION NUMBER" shall be the number of the Shares
equal to the product of (x) the quotient determined by dividing the number of
Common Stock and Underlying Common Stock owned by the Investor by the aggregate
number of Common Stock and Underlying Common Stock owned by the Investor and 5%
Holder and (y) the Co-Sale Shares.
SECTION 4. PREEMPTIVE RIGHTS.
(a) Except for Permitted Issuances, if prior to a Qualified Initial Public
Offering, the Company authorizes the issuance or sale of any shares of Common
Stock or Underlying
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Common Stock or any rights or options to subscribe for or purchase shares of
Common Stock or Underlying Common Stock (collectively, "ADDITIONAL Shares"), the
Company will first offer to sell to each of the Stockholders a portion of such
stock or securities equal to the quotient determined by dividing (i) the number
of shares of Common Stock and Underlying Common Stock held by such Stockholder
by (ii) the total number of Common Stock and Underlying Common Stock held by all
the Company's stockholders. The Additional Shares sold to a Stockholder pursuant
to this Section shall be calculated to enable such Stockholder to maintain his
or its percentage interest in the Company on a fully-diluted basis (excluding
the effect of the exercise of all rights to acquire Common Stock or Underlying
Common Stock arising from a Permitted Issuance) immediately prior to the
proposed issuance. Each Stockholder shall be entitled to purchase Additional
Shares at a price and on terms which are no less favorable to such Stockholder
in any respect than any price or terms on which such Additional Shares is to be
offered to any other Person. The purchase price for all Additional Shares
offered to such Stockholder shall be payable in cash. The Company shall give
each Stockholder at least thirty (30) days' prior written notice of any such
proposed issuance setting forth in reasonable detail the proposed terms and
conditions thereof and shall offer to each Stockholder the opportunity to
purchase such Additional Shares at the same price, on the same terms and at the
same time as such Shares are proposed to be issued by the Company. If the terms
upon which such Additional Shares are being offered provide for consideration
other than cash, then the Company shall make a reasonable determination of the
cash value per share of such other consideration and such Stockholder shall pay
such cash value for the Additional Shares, if any, being purchased by such
Stockholder under this Section. A Stockholder may exercise his preemptive right
by delivery of an irrevocable written notice thereof to the Company not more
than fifteen t(15) days after receipt of the Company's notice, together with
cash or a certified check in the amount of the purchase price of the Additional
Shares being purchased by such Stockholder under this Section. Upon the issuance
of Additional Shares as contemplated by this Section, in the event any
Stockholder fails to exercise his preemptive rights as provided for in this
Section, such right shall be deemed irrevocably waived with respect to such
issuance of Additional Shares and such failure shall be deemed an election not
to exercise the preemptive rights granted hereunder with respect to such
issuance of Additional Shares. Upon a Public Offering, all preemptive rights
provided herein shall automatically expire without further action and be of no
further force or effect.
(b) Except for Permitted Issuances, if prior to a Qualified Public
Offering, the Company authorizes the issuance or sale of any securities other
than Additional Shares (collectively, "OTHER SECURITIES"), the Company will
first offer to sell to each of the Investors all, but not less than all, such
Other Securities. The Investors shall be entitled to purchase such Other
Securities at the price and on the terms as established by the Company and as
set forth in a written term sheet which shall provide for the terms and
conditions by which any potential investor shall purchase the Other Securities
and which has been approved by the Board of Directors of the Company in its sole
discretion (the "Term Sheet"). The purchase price for the Other Securities shall
be payable in cash. The Company shall give each Investor at least fifteen (15)
days' prior written notice of any proposed issuance of Other Securities, and
such notice shall
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include a copy of the Term Sheet. If the terms upon which such Other Securities
are being offered provide for consideration other than cash, then the Company
shall make a reasonable determination of the cash value per share of such other
consideration and such Investor shall pay such cash value for the Other
Securities, if any, being purchased by such Investor under this Section. An
Investor may exercise his preemptive right to purchase the Other Securities
under this SUBSECTION 4(b) by delivery of an irrevocable written notice thereof
to the Company not more than ten (10) days after receipt of the Company's
notice, together with cash or a certified check in the amount of the purchase
price of the Other Securities being purchased by such Investor under this
Section. Upon the issuance of Other Securities as contemplated by this Section,
in the event any Investor fails to exercise his preemptive rights as provided
for in this Section, such right shall be deemed irrevocably waived with respect
to such issuance of Other Securities and such failure shall be deemed an
election not to exercise the preemptive rights granted hereunder with respect to
such issuance of Other Securities. Upon a Public offering, all preemptive rights
provided herein shall automatically expire without further action and be of no
further force or effect.
SECTION 5. SMITH PUT OPTION.
(a) In the event that, as of January 1, 2001, the Company has not completed
a Qualified Initial Public Offering, Smith shall, at any time thereafter, have
the right to sell to the Company, and the Company shall be required to purchase,
all, but not less than all, of the Shares then owned by Smith, by giving the
Company written notice of his election to do so. Such purchase shall occur not
later than one hundred twenty (120) days following the Company's receipt of such
written notice from Smith. The purchase price for such Shares shall be
determined in accordance with SCHEDULE II attached hereto and made a part
hereof, and shall be paid as follows:
i) twelve and one-half percent (12.5%) of the purchase price to be
paid in cash on the date of closing specified in accordance with
this Section; and
ii) the remaining eighty-seven and one-half percent (87.5%) of the
purchase price to be evidenced by a Promissory Note (a "Note")
executed by the Company, which Note shall provide for deferred
payments thereunder over a period of seven (7) years from the date
of closing, paid in seven (7) equal annual installments payable on
the anniversary dates of the closing, plus interest on the unpaid
principal amount from time to time outstanding, at the rate of
interest published on January 1 of each applicable calendar year
(or the business day most closely approximating thereto after
January 1), by the WALL STREET JOURNAL and designated as the
"prime" rate of interest (the "Interest Rate") which Interest Rate
shall be effective from and after that date through the remainder
of such calendar
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year until the next change in the Interest Rate as provided
herein. Interest shall be calculated based upon a three hundred
and sixty (360) day year consisting of twelve (32) thirty (30) day
months and charged for the actual number of days elapsed.
Principal due under the Note shall be paid in seven (7) equal
annual installments, each payable on the anniversary date of the
closing. All accrued interest under the Note shall be paid in
quarterly installments, in arrears, payable on the first business
day of each January, April, July and October during the term of
the Note. A final payment of all outstanding principal and
interest owed thereunder shall be paid at maturity. The deferred
portion of the purchase price for Shares shall be secured by a
pledge of the Shares subject to purchase hereunder.
(b) Upon completion of a Qualified Initial Public Offering, the put option
provided for in this Section shall expire and be of no further force or effect.
(c) Notwithstanding anything to the contrary contained herein, Smith agrees
not to exercise his rights pursuant to this SECTION 5 until a date no earlier
than six (6) months after the optional or mandatory redemption of the Investor's
Series A Preferred as provided in the Certificate of Designation.
SECTION 6. CALL OPTION ON SMITH'S SHARES. At any time after January 1,
2003, the Company (or Matzkin if the Company elects not to exercise its option
to purchase under this SECTION 7) shall have the right to purchase from Smith,
and Smith shall be required to sell to the Company or Matzkin, as applicable,
all, but not less than all, of the Shares then owned by Smith, by giving Smith
written notice of its or his election to do so. Such purchase shall occur not
later than one hundred twenty (120) days following the date of delivery of such
written notice from the Company or Matzkin, as applicable. The purchase price
shall be determined in accordance with SCHEDULE II attached hereto, and shall be
paid in accordance with the provisions of SUBSECTIONS 5(a)(i) AND (ii). Upon
completion of a Qualified Initial Public Offering, the call option provided for
in this Section shall expire and be of no further force or effect.
SECTION 7. DEMAND REGISTRATION. Subject to the satisfaction of each of the
requirements specified in this Section, the Company will use its best efforts to
effect the registration of Smith or the Investors' Common Stock or Underlying
Common Stock, as applicable, as provided herein:
(a) If the Company shall receive at any time after the fourth (4th)
anniversary of the First Closing or nine (9) months after the consummation of a
Qualified Initial Public Offering, by the Company of its Common Stock, a written
request from either Smith or the Investor (the "INITIATING HOLDER"), that the
Company effect the registration of such Initiating Holder's Common Stock or
Underlying Common Stock under the Securities Act, the Company shall promptly
give written notice of such proposed registration to all Stockholders, stating
that such holders have the
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right to request that any or all of the Common Stock or Underlying Common Stock
owned by them be included in such registration. The Company shall include in
such registration all Common Stock or Underlying Common Stock, as applicable,
with respect to which the Company receives written requests from the holders
thereof for inclusion therein subject to the limitations contained in this
Section, and thereupon the Company will, as expeditiously as possible, use its
best efforts to effect the registration, under the Securities Act, of such
Common Stock or Underlying Common Stock, as applicable, which the Company has
been requested to register for disposition by such holders.
(b) The demand registration rights provided for in SUBSECTION 7(a) shall be
deemed satisfied by the Company when one registration statement shall have been
filed by the Company with and made effective by the Securities and Exchange
Commission under the Securities Act pursuant to requests made pursuant to
SUBSECTION 7(a) and the offerings pursuant to each such registration statement
shall have closed. In addition to the rights provided in SUBSECTION 7(a), the
Investor shall be entitled to one demand registration on Form S-2 or Form S-3,
if available. The Company shall have no obligation to attempt registration of
any offering of Common Stock or Underlying Common Stock under the Securities Act
more often than once in any twelve (12) month period.
(c) If the Company at any time proposes or is required to register any of
its Common Stock or Underlying Common Stock under the Securities Act or any
applicable state securities or blue sky laws on a form which permits inclusion
of the Common Stock or Underlying Common Stock, as applicable, (other than on
Form S-4 or S-8), it will each such time give written notice to all holders of
then existing Common Stock or Underlying Common Stock, as applicable, of its
intention to do so. Upon the written request of any such holder given not later
than fifteen (15) days after the receipt of any such notice, the Company will
use its best efforts to cause all Common Stock or Underlying Common which such
holders shall have requested be registered to be registered under the Securities
Act and any applicable state securities or blue sky laws, all to the extent
required to permit the sale or other disposition by such holder of shares so
registered. No registrations of Common Stock or Underlying Common Stock under
this SUBSECTION 7(c) shall relieve the Company of its obligation to effect
registrations under SUBSECTION 7(a) hereof, or shall constitute a registration
request by any holder of Common Stock or Underlying Common Stock under
SUBSECTION 7(a).
(d) Whenever the Company is required by the provisions of this Agreement to
use its best efforts to effect the registration of Common Stock or Underlying
Common Stock, as applicable, of the Company under the Securities Act, the
Company will, as expeditiously as possible:
i) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such securities and use its
best efforts to cause such registration statement to become
effective;
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ii) prepare and file with the Securities and Exchange Commission such
post-effective amendments and supplements to such registration
statement and the prospectus used in connection therewith as may
be necessary to keep such registration statement effective for a
period of (Y) 120 days, or (Z) such time as necessary to permit
each Stockholder to dispose of all of such Stockholder's Common
Stock or Underlying Common Stock, as applicable, covered by the
registration statement, whichever first occurs, and to comply with
the provisions of the Securities Act with respect to the sale or
other disposition of all securities covered by such registration
statement during such period in accordance with the intended
method or methods of disposition of securities;
iii) use its best efforts to register or qualify all the securities
covered by such registration statement under such other securities
or blue sky laws of such jurisdictions as each seller shall
reasonably request, and do any and all other acts and things which
may be necessary under such securities or blue sky laws to enable
such seller to consummate the public sale or other disposition in
such jurisdiction of the securities owned by such seller covered
by such registration statement; PROVIDED, HOWEVER, that the
Company shall not be required to (X) qualify to do business as a
foreign business entity in any jurisdiction wherein it would not
otherwise be required to qualify but for this subparagraph, (Y)
subject itself to taxation in any such jurisdiction, or (Z)
consent to general service of process in any such jurisdiction;
and
iv) pay, to the fullest extent allowable under applicable state
securities and blue sky laws, all expenses incurred in effecting
the registration(s) provided for in SUBSECTION 7(a) AND (b)
hereof, and in effecting all of the registrations provided for in
SUBSECTION 7(c) hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and
disbursements of one law firm serving as counsel for the sellers
(who shall be selected by Investors), underwriting expenses (other
than underwriting discounts and commissions), expenses of any
audits incident to or required by any such registration and
expenses of complying with the securities or blue sky laws of any
jurisdictions pursuant to SUBSECTION 7(d)(iii). Other than as
provided in this SUBSECTION 7(d)(iv), the Company shall not be
required to pay for the individual expenses of any sellers. With
respect to a registration of securities pursuant to Section 7(a)
hereof, the Company shall not be required to pay for expenses as
set forth above for any such registration, the request for which
has been withdrawn by the sellers, in which case the sellers
causing the withdrawal of the registration statement shall
promptly reimburse the Company for all reasonable expenses paid on
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<PAGE>
their behalf and shall be responsible for all unpaid amounts
relating to the withdrawn registration statement.
(e) To the extent any Stockholder desires to include any Common Stock or
Underlying Common Stock owned by such Stockholder in an underwritten primary or
secondary offering of securities of the Company, whether pursuant to SUBSECTION
7(a), SUBSECTION 7(b), SUBSECTION 7(c) or otherwise, the following priorities
shall govern and control:
i) In the event the registration is an underwritten primary
registration on behalf of the Company and the managing
underwriters advise the Company in writing that, in their opinion,
the number of securities to be included in such registration
exceeds the number which can be sold at a price reasonably related
to the then current market value of such securities and without
materially and adversely affecting such offering, Company will
include in such registration (X) first, the Common Stock that the
Company proposes to sell, (Y) second, the Common Stock or
Underlying Common Stock, as applicable, requested by the
Stockholders to be included in such registration, PRO RATA among
the Stockholders on the basis of the number of Common Stock and
Underlying Common Stock that are owned by such Stockholders, and
(Z) third, other securities requested to be included in such
registration; and
ii) In the event the registration is an underwritten secondary
registration on behalf of the Stockholders, and the managing
underwriters advise the Company in writing that, in their opinion,
the number of shares of Common Stock and Underlying Common Stock
requested to be included in such registration exceeds the number
which can be sold at a price reasonably related to the then
current market value of such securities and without materially and
adversely affecting such offering, the Company will include in
such registration (Y) first, the Common Stock and Underlying
Common Stock requested to be included in such registration by the
Stockholders, pro RATA among the Stockholders on the basis of the
number of shares of Common Stock and Underlying Common Stock that
are owned by such Stockholders, and (Z) second, other securities
requested to be included in such registration; PROVIDED, however,
that the Company will make reasonable efforts to structure any
offering of its Common Stock pursuant to a registration under the
Securities Act so that the securities registered under SUBSECTION
7(c) may account for at least 25% of such offering.
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<PAGE>
(f) The Company shall have the right to select the investment banker or
bankers who shall serve as the manager and/or co-managers for all registrations
of offerings of securities under SECTION 7 hereof, PROVIDED, HOWEVER, that such
banker or bankers shall be of recognized standing.
(g) Notwithstanding anything to the contrary contained herein, no initial
Public Offering of the Company shall be made unless made on the following terms
and conditions:
i) The annual revenues of the Company for the most recently completed
fiscal year are $25,000,000 or more;
ii) The net proceeds to the Company from such initial Public Offering
of securities shall not be less than $10,000,000;
iii) Such initial Public Offering constitutes a Qualified Initial
Public Offering.
SECTION 8. INDEMNIFICATION-RELATING TO REGISTRATION OF SHARES. In the event
of a registration of any of the Shares under the Securities Act pursuant to
SECTION 7 hereof, the Company will indemnify and hold harmless each seller of
such Shares thereunder and each underwriter of Shares thereunder and each other
person, if any, who controls such seller or underwriter within the meaning of
the Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such seller or underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Shares were registered
under the Securities Act pursuant to SECTION 7, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each such seller, each
such underwriter and each such controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by such seller, such underwriter
or such controlling person in writing specifically for use in such registration
statement or prospectus.
In the event of a registration of any of the Shares under the Securities
Act pursuant to SECTION 7 hereof, each seller of such Shares thereunder,
severally and not jointly, will indemnify and hold harmless the Company and each
person, if any, who controls the Company within the meaning of the Securities
Act, each officer of the Company who signs the registration statement, each
director of the Company, each underwriter and each person who controls any
underwriter within the meaning of the Securities Act, against all losses,
claims, damages or liabilities, joint or
15
<PAGE>
several, to which the Company or such officer or director or underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement under
which such Shares were registered under the Securities Act pursuant to SECTION 7
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Company and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; PROVIDED, HOWEVER, that such seller will be liable
hereunder in any such case if and only to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with information pertaining to such seller, as such, furnished
in writing to the Company by such seller specifically for use in such
registration statement or prospectus; PROVIDED, FURTHER, HOWEVER, that the
liability of each seller hereunder shall be limited to the proceeds (net of
underwriting discounts and commissions) received by such seller from the sale of
Shares covered by such registration statement.
Promptly after receipt by an indemnified party hereunder of notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party hereunder, notify the
indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party other than under this SECTION 8. In case any such action
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such indemnified party under this SECTION 8 for any
legal expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation and of
liaison with counsel so selected; PROVIDED, HOWEVER, that, if the defendants in
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
reasonable defenses available to it which are different from or additional to
those available to the indemnifying party, or if the interests of the
indemnified party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
Notwithstanding the foregoing, any indemnified party shall have the right
to retain its own, counsel in any such action, but the fees and disbursements of
such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party shall have failed to retain
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<PAGE>
counsel for the indemnified person as aforesaid or (ii) the indemnifying party
and such indemnified party shall have mutually agreed to the retention of such
counsel. It is understood that the indemnifying party shall not, in connection
with any action or related actions in the same jurisdiction, be liable for the
fees and disbursements of more than one separate firm qualified in such
jurisdiction to act as counsel for the indemnified party. The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
If the indemnification provided for in the first two paragraphs of this
SECTION 8 is unavailable or insufficient to hold harmless an indemnified party
under such paragraphs in respect of any losses, claims, damages or liabilities
or actions 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 losses, claims,
damages, liabilities or actions in such proportion as appropriate to reflect the
relative fault of the Company, on the one hand, and the underwriters and the
sellers of such Shares, on the other, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or actions
as well as any other relevant equitable considerations, including the failure to
give any notice under the third paragraph of this SECTION 8. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact relates to information supplied by
the Company, on the one hand, or the underwriters and the sellers of such
Shares, on the other, and to the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and each Stockholder agree that it would not be just and equitable
if contributions pursuant to this paragraph were determined by pro rata
allocation (even if all of the sellers of such Shares were treated as one entity
for such purpose) or by any other method of allocation which did not take
account. of the equitable considerations referred to above in this paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or action in respect thereof, referred to above in
this paragraph, shall be deemed to include 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
paragraph, the sellers of such Shares shall not be required to contribute any
amount in excess of the amount, if any, by which the total price at which the
Common Stock sold by each of them was offered to the public exceeds the amount
of any damages which they would have otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission. No person guilty of
fraudulent misrepresentations (within the meaning of Section 11(f) of the
Securities Act), shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation.
The indemnification of underwriters provided for in this SECTION 8 shall be
on such other terms and conditions as are at the time customary and reasonably
required by such underwriters. In that event the indemnification of the sellers
of Shares in such underwriting shall at the sellers' request be modified to
conform to such terms and conditions.
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<PAGE>
SECTION 9. INDEMNIFICATION-STOCKHOLDER ACTING AS OFFICER OR DIRECTOR. The
Company shall indemnify and hold harmless each Stockholder, to the fullest
extent permitted by Section 145 of the Delaware General Corporation Law (as
amended), from and against all liabilities, losses, costs, damages and expenses
(including reasonable attorneys' fees and costs) incurred or sustained by them
as a result of their service to the Company, as a director or officer.
SECTION 10. ENDORSEMENT OF STOCK CERTIFICATE. Each certificate evidencing
an ownership interest in the Company, now or hereafter held by any Stockholder
shall be stamped on the face or the back thereof with a legend in substantially
the following form:
"The shares represented by this Certificate were originally issued
on October 25, 1996, and have not been registered under the
Securities Act of 1933, as amended. The transfer of the securities
represented by this Certificate is subject to the conditions
specified in the Stockholders' Agreement, dated as of October 25,
1996, between the issuer (the "Company") and certain of its
stockholders, and the Company reserves the right to refuse
transfer of such securities until such conditions have been
fulfilled with respect to such transfer. A copy of such conditions
will be furnished by the Company to the holder hereof upon written
request and without charge."
SECTION 11. CONFIDENTIALITY. Each of the Stockholders (also referred to
herein as "he", "him" and "his") hereby agrees that he and his Affiliates have
been and will be, by virtue of his ownership of Shares of the Company, given
access to and possession of certain valuable and confidential information, both
verbal and written, which are proprietary to the Company and which information
is sufficiently secret to derive economic value, actual or potential, from not
being generally known to other persons who can obtain economic value from its
disclosure or use and is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy or confidentiality (all of such
proprietary and confidential information and business relationships and any
other proprietary and confidential information collectively referred t-o herein
as the "'Confidential Information"). Such Confidential Information specifically
includes, without limitation: lists of actual or potential institutional and
individual clients and customers, methods of operation, information regarding
accounts, personnel files, contracts and agreements, trade secrets and other
information, documents and materials regarding the past, present and future
operations of the Company and its business; PROVIDED, HOWEVER, that Confidential
Information shall not be subject to the restrictions set forth in this Section
to the extent that (Y) it is or becomes available to the public from a source
other than any Stockholder, or (Z) it is required by law to be disclosed by the
Stockholder; PROVIDED, HOWEVER, that the Stockholder shall notify the President
of the Company in writing at least ten (10) days prior to making any such
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<PAGE>
contemplated disclosure of Confidential Information. The Stockholder covenants
and agrees that he will, and will use all reasonable efforts to cause his
Affiliates to, hold in confidence and not use or disclose, directly or
indirectly, to any Person, during the period that the Stockholder owns Shares of
the Company and at all times thereafter, except when and as specifically
authorized by the Company for its benefit, any Confidential Information. The
Stockholder further covenants and agrees that he will, and will use all
reasonable efforts to cause his Affiliates to, deliver to the Company all
tangible forms of such Confidential Information in his possession or control
and, in addition thereto, any and all other information that they may have with
respect to the Company. The Stockholder will not, and will use all reasonable
efforts to cause his Affiliates to not, retain any copies of such Confidential
Information.
SECTION 12. EQUITABLE REMEDIES: DEFAULT. The Stockholders agree that the
covenants contained in SECTIONS 2, 6 AND 11 hereof are vital to the viability of
the Company and each of its respective businesses. In that regard, each
Stockholder agrees that any breach or other action that, in the reasonable
judgment of the Company, constitutes a threatened breach (a "THREATENED BREACH")
of SECTION 2, 6 OR 11 hereof would cause irreparable and immediate harm to the
Company and that money would not be an adequate remedy in the event of any such
breach. By reason of the foregoing, Smith agrees that the Company shall be
entitled to injunctive or other equitable relief in the event of any breach or
Threatened Breach of SECTION 2, 6 OR 11 hereof, and hereby irrevocably waives
any claim or defense that an adequate remedy is available at law and agrees not
to interpose any claim or defense that an adequate remedy at law exists. In
addition, each Stockholder agrees to reimburse the Company for any and all costs
and expenses (including, without limitation, attorneys' fees and costs) incurred
by the Company, as a result of their enforcing the terms and provisions of this
Agreement. Nothing herein shall prevent the Company from electing to seek any
monetary or other relief in addition to or in lieu of any equitable relief for
breach or Threatened Breach of SECTION 2, 6 OR 11 hereof. The failure of the
Company to promptly institute a legal action upon any such breach or Threatened
Breach shall not constitute a waiver of that or any other breach or Threatened
Breach hereof.
In addition to the foregoing, a breach or Threatened Breach of any of the
provisions of SECTION 2, 6 OR 11 hereof by one or more of any Stockholder's
Affiliates shall constitute an event of default by such Stockholder.
SECTION 13. BOARD OF DIRECTORS. The Stockholders hereby agree and
acknowledge that the Stockholders will vote their Shares in the following
manner:
(a) so long as any shares of Series A Preferred or Underlying Common Stock
shall be outstanding, the Company's Board of Directors (the "Board") shall at
all times consist of the following four (4) individuals (or in the event any
such individual is unwilling or unable to so serve, one of their representatives
shall so serve): (1) Matzkin; (2) the Chief Operating Officer of
19
<PAGE>
the Company (initially, Mitchell Olan); (3) a representative of CIHL (initially,
Raucci); and (4) Smith; and
(b) Matzkin shall have three (3) votes and each of the other three (3)
Board members shall have one (1) vote each. Therefore, there shall be a total of
six (6) votes on each matter where the Board may vote or otherwise act. In the
event that this SUBSECTION 13(b) is not enforceable, whether pursuant to
applicable law or otherwise, the Stockholders agree to increase the size of the
Board to six (6) members and to elect three (3) representatives chosen by
Matzkin to serve as directors. The parties hereto agree to vote their shares in
such a way that directors selected by Matzkin shall have 50\ of the aggregate
number of votes held by the Board. In the event of a deadlock of the Board, then
to resolve any such issue causing a deadlock, the holders of Common Stock
together with the holders of the Series A Preferred voting on an as converted
basis shall vote on and decide any such matter.
(c) CIHL shall have the right, at its option and at its sole cost and
expense to appoint an observer to attend any and all Board meetings and receive
all materials distributed to the directors at such Board meetings (but such
individual shall not be a member of the Board or have any voting rights).
(d) There shall be an executive committee of the 90ard (the "EXECUTIVE
COMMITTEE") established that shall consist of the following three (3)
individuals: (1) Matzkin; (2) one representative designated by CIHL (initially,
Raucci); and (3) Smith. The Executive Committee shall act on any issues
delegated to it by the Board from time to time. The Executive Committee shall
decide all matters within its purview by majority vote, and each member of the
Executive Committee shall have one vote upon each such matter, subject in all
events to review by the full Board.
(e) A compensation committee of the Board (the "COMPENSATION COMMITTEE")
shall be established when and as the Executive Committee shall determine. When
established, the Compensation Committee shall consist of the following three (3)
individuals: (1) Matzkin; (2) one representative designated by CIHL (initially,
Raucci); and (3) Smith. The Compensation Committee shall act on any issues
delegated to it by the Board from time to time pertaining to compensation of the
Corporation's senior management, including, without limitation, the issuance of
stock options, bonuses, and/or other securities and/or property. The
Compensation Committee shall decide all matters within its purview in the same
manner as the Executive Committee, subject in all events to review by the full
Board.
(f) An audit committee of the Board (the "AUDIT COMMITTEE") shall be
established when and as the Executive Committee shall determine. When
established, the Audit Committee
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<PAGE>
shall consist of the following three (3) individuals: (1) Matzkin; (2) one
representative designated by CIHL (initially, Raucci); and (3) Smith. The Audit
Committee shall act on any issues delegated to it by the Board from time to time
pertaining to the Corporation's accounting practices and financial controls,
selection of independent auditors and related items. The Audit Committee shall
decide all matters within its purview in the same manner as the Executive
Committee, subject in all events to review by the full Board.
SECTION 14. KEY-MAN LIFE INSURANCE. The Company shall increase the amount
of key-man life insurance policy on the life of Steven R. Matzkin (the "MATZKIN
LIFE INSURANCE") by the face amount of $1,500,000 from that currently in effect
as of the date hereof. The Matzkin Life Insurance shall be in full force and
effect as of the First Closing. The Matzkin Life Insurance policy shall name the
Company as beneficiary.
SECTION 15. HEADINGS. The headings, titles and subtitles herein are for
convenience of reference only and shall not in any manner affect the
construction or interpretation of any of the provisions hereof.
SECTION 16. PRIOR AGREEMENTS. This Agreement shall supersede all prior
agreements, communications, understandings and negotiations among the parties
hereto, including, without limitation, the Shareholders Agreement, dated as of
January 3, 1994, by and among Golden Care Holdings, L.C., a Florida limited
liability company (and a predecessor of the Company), Matzkin and Smith.
SECTION 17. ENTIRE AGREEMENT. This Agreement contains the entire agreement
and understanding of the parties hereto with respect to the subject matter
hereof and no representations, promises, agreements or understandings, written
or oral, not contained herein shall be of any force or effect.
SECTION 18. MUTUAL CONTRIBUTION. The parties to this Agreement and their
counsel have mutually contributed to its drafting. Consequently, no provision of
this Agreement shall be construed against any party on the ground that such
party drafted the provision or caused it to be drafted.
SECTION 19. NOTICES. Except as provided otherwise herein, all notices
referred to herein shall be in writing and will be delivered by (i) registered
or certified mail, return receipt requested and postage prepaid, (ii) reputable
overnight courier service, charges prepaid, or (iii) telecopier (and confirmed
by return facsimile) and will be deemed to have been given when so mailed or
sent (i) to the Company, at its principal executive offices and (ii) to the
Stockholders,
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<PAGE>
at each Stockholder's address as it appears in the stock records of the Company
(unless otherwise indicated by such Stockholder).
SECTION 20. TERM. This Agreement shall continue to be in full force and
effect so long as any of the Stockholders or their transferees hold, directly or
indirectly, Shares subject hereto.
SECTION 21. ASSIGNMENT: THIRD PARTY BENEFICIARIES. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns; provided, that Except as specifically provided
herein, neither this Agreement nor the benefits provided herein, shall be
assignable in any respect without the prior written consent of the Company
provided, however, such consent shall not be required in connection with an
assignment of this Agreement to an Affiliate of CIHL. Nothing in this Agreement
shall create or be deemed to create any third party beneficiary rights in any
person or entity not party to this Agreement.
SECTION 22. AMENDMENT. Neither this Agreement nor any provisions hereof
shall be waived, modified, discharged or terminated except by an instrument in
writing signed by the party against whom any such waiver, modification,
discharge or termination is sought.
SECTION 23. FURTHER ASSURANCES. Each party hereto agrees to execute any
further documents, agreements or instruments, and to perform any further acts
and deeds, that may be necessary to carry out the terms and provisions of this
Agreement.
SECTION 24. GOVERNING LAW. This Agreement Shall Be Construed, Performed And
Enforced In Accordance With, And Governed By The Internal Laws Of The State Of
Delaware, Without Giving Effect To The Principles Of Conflicts Of Law Thereof.
SECTION 25. VENUE. Any Action Or Proceeding To Enforce Any Provision Of, Or
Based On Any Right Arising Out Of, This Agreement Shall Be Brought Against Any
Of The Parties In State Or Federal Courts Located In Sarasota County, Florida
And Each Of The Parties Hereby Consents To The Non-Exclusive Jurisdiction Of
Such Courts (And Of The Appropriate Appellate Courts) In Any Such Action Or
Proceeding And Waives Any Objection To Venue Laid Therein; PROVIDED, That An
Action To Enforce A Judgment Obtained In Any Such Courts May Be Brought In Any
Appropriate Venue.
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<PAGE>
SECTION 26. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
or invalid under such law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or this Agreement.
SECTION 27. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
[Signature Page Follows]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Stockholders Agreement as of the date first written above.
Company:
DENTAL CARE ALLIANCE, INC.
By:______________________________
Title:___________________________
Stockholders:
_________________________________
CURTIS LEE SMITH, JR.
_________________________________
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Stockholders Agreement as of the date first written above.
Company:
DENTAL CARE ALLIANCE, INC.
By:_____________________________
Title:
Stockholders:
________________________________
CURTIS LEE SMITH, JR.
________________________________
STEVEN R. MATZKIN
25
<PAGE>
Stockholders:
CRESCENT INTERNATIONAL
HOLDINGS LIMITED
By:____________________________
Title: Attorney-In-Fact
________________________________
ROBERT F. RAUCCI
26
EXHIBIT 10.23
BUSINESS LOAN AGREEMENT
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal Loan Date Maturity Loan No. Call Collateral Officer
$600,000.00 08-20-1997 06-01-1998 06200058706 A100 36 Account 0521 Initials
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
- -------------------------------------------------------------------------------
Borrower: Dental Care Alliance, Inc. Lender: Barnett Bank, N.A.
1343 Main Street, 7th Floor P.O. Box 40329
Sarasota, FL 34236 Jacksonville, FL 32203-0329
THIS BUSINESS LOAN AGREEMENT between Dental Care Alliance, Inc. ("Borrower") and
BARNETT BANK, N.A. ("Lender") is made and executed on the following terms and
conditions. Borrower has received prior commercial loans from Lender or has
applied to Lender for a commercial loan or loans or other financial
accommodations, including those which may be described on any exhibit or
schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement individually as the "Loan"
and collectively as the "Loans." Borrower understands and agrees that: (a) in
granting, renewing, or extending any Loan, Lender is relying upon Borrower's
representations, warranties, and agreements, as set forth in this Agreement; (b)
the granting, renewing, or extending of any Loan by Lender at all times shall be
subject to Lender's sole judgment and discretion; and (c) all such Loans shall
be and shall remain subject to the following terms and conditions of this
Agreement.
TERM. This Agreement shall be effective as of August 20, 1997, and shall
continue thereafter until all indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
AGREEMENT. The word "Agreement" means this Business Loan Agreement, as
this Business Loan Agreement may be amended or modified from time to
time, together with all exhibits and schedules attached to this
Business Loan Agreement from time to time.
BORROWER. The word "Borrower" means Dental Care Alliance, Inc.
CERCLA. The word "CERCLA" means the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.
COLLATERAL. The word "Collateral" means and includes without limitation
all property and assets granted as collateral security for a loan,
whether real or personal property, whether granted directly or
indirectly, whether granted now or in the future, and whether granted
in the form of a security interest, mortgage, deed of trust,
assignment, pledge, chattel mortgage, chattel trust, factor's lien,
equipment trust, conditional sale, trust receipt, lien, charge, lien or
title retention contract, lease or consignment intended as a security
device, or any other security or lien interest whatsoever, whether
created by law, contract, or otherwise.
ERISA. The word "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time and the regulations and
published interpretation thereof.
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "EVENTS OF DEFAULT."
GAAP. The word "GAAP" means generally accepted accounting principles
consistently applied.
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LOAN NO. 06200058706 (CONTINUED)
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GRANTOR. The word "Grantor" means and includes without limitation each
and all of the persons or entities granting a Security Interest in any
Collateral for the indebtedness, including without limitation all
Borrowers granting such a Security Interest.
GUARANTOR. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness.
INDEBTEDNESS. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well
as all claims by Lender against Borrower, or any one or more of them;
whether now existing, contemporaneously with or hereafter incurred or
created and any renewals, modifications, extensions, substitutions or
consolidations hereof, voluntary or involuntary incurred, secured or
unsecured, absolute or contingent, liquidated or unliquidated;
determined or undetermined, whether Borrower may be liable individually
or jointly with others, or primarily or secondarily, or as guarantor,
surety, or otherwise; whether recovery upon the Indebtedness may be or
hereafter may become barred by any statute or limitations; and whether
such Indebtedness may be or hereafter may become otherwise
unenforceable.
LENDER. The word "Lender" means BARNETT BANK, N.A., its successors and
assigns.
LOAN. The word "Loan" or "Loans" means and includes any and all loans,
advances, interest, costs, fees, documentary stamp tax and/or
intangible taxes, debts, overdraft Indebtedness, leases, drafts,
letters of credit, credit cards, and business services from Lender to
Borrower, whether now existing, contemporaneously with, or hereafter
incurred or created and any renewals, modification, extensions,
substitutions or consolidations thereof, and however evidenced,
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to
this Agreement from time to time.
NOTE. The word "Note" means Borrower's promissory note or notes, if
any, evidencing Borrower's Loan obligations in favor of Lender, as well
as any renewal, extension, modification, consolidation, substitute,
replacement or refinancing note or notes therefor.
PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and
security interests securing Indebtedness owed by Borrower to Lender:
(b) liens for taxes, assessments, or similar charges either not yet due
or being contested in good faith; (c) liens of materialmen, mechanics,
warehousemen, or carriers, or other like liens arising in the ordinary
course of business and securing obligations which are not yet
delinquent; (d) purchase money liens or purchase money security
interests upon or in any property acquired or held by Borrower in the
ordinary course of business to secure Indebtedness outstanding on the
date of this Agreement or permitted to be incurred under the paragraph
of this Agreement titled "Indebtedness and Liens"; (e) liens and
security interests which, as of the date of this Agreement, have been
disclosed to and approved by the Lender in writing; and (f) those liens
and security interests which in the aggregate constitute an immaterial
and insignificant monetary amount with respect to the net value of
Borrower's assets.
RELATED DOCUMENTS. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection
with the Indebtedness.
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08-20-1997 BUSINESS LOAN AGREEMENT PAGE 3
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SECURITY AGREEMENT. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract,
or otherwise, evidencing, governing, representing, or creating a
Security Interest.
SECURITY INTEREST. The words "Security Interest" mean and include
without limitation any type of collateral security, whether in the form
of a lien, charge, mortgage, deed of trust, assignment, pledge, chattel
trust, factor's lien, equipment trust, conditional sale, trust receipt,
lien or title retention, contract, lease or consignment intended as a
security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and
Reauthorization Act of 1986 as now or hereafter amended.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and all times any Indebtedness exists:
ORGANIZATION. Borrower is a corporation which is duly organized,
validly existing, and in good standing under the laws of the state of
Borrower's Incorporation and is validly existing and in good standing
in all states in which Borrower is doing business. Borrower has the
full power and authority to own its properties and to transact the
businesses in which it is presently engaged or presently proposes to
engage. Borrower also is duly qualified as a foreign corporation and is
in good standing in all states in which the failure to so qualify would
have a material adverse effect on its businesses or financial
condition.
AUTHORIZATION. The execution, delivery, and performance of this
Agreement and all Related Documents by Borrower, to the extent to be
executed, delivered or performed by Borrower, have been duly authorized
by all necessary action by Borrower, do not require the consent or
approval of any other person, regulatory authority or governmental
body; and do not conflict with, result in a violation of, or constitute
a default under (a) any provision of its articles of incorporation or
organization, or bylaws, or any agreement or other instrument binding
upon Borrower or (b) any law, governmental regulation, court decree, or
order applicable to Borrower.
FINANCIAL INFORMATION. Each financial statement of Borrower and each
information, exhibit or report supplied to Lender by Borrower, its
agents or accountants truly and completely disclosed Borrower's
financial condition as of the date of the statement in accordance with
GAAP, and there has been no material adverse change in Borrower's
financial or business condition or operations subsequent to the date of
the most recent financial statement supplied to Lender and none are
imminent or threatened. Borrower has no material contingent obligations
except as disclosed in such financial statements. Borrower acknowledges
and agrees that Lender is relying on all such financial information in
entering into, continuing, renewing or extending any Loan.
LEGAL EFFECT. This Agreement constitutes, and any instrument or
agreement required hereunder to be given by Borrower when delivered
will constitute, legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender
and as accepted by Lender, and except for property tax liens for taxes
not presently due and payable, Borrower owns and has good title to all
of Borrower's properties free and clear of all Security Interests, and
has not executed any security documents or financing statements
relating to such properties. All of Borrower's properties are titled in
Borrower's legal name, and Borrower has not
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08-20-1997 BUSINESS LOAN AGREEMENT PAGE 4
LOAN NO. 06200058706 (CONTINUED)
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used, or filed a financing statement under, any other name for at least
the last five (5) years. Additionally, Borrower and Borrower's real and
personal properties comply fully with all laws, ordinances, statutes,
codes and requirements of the Americans with Disabilities Act of 1990.
HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous
substance," "disposal," "release," and "threatened releases," as used
in this Agreement, shall have the same meanings as set forth in the
"CERCLA," "SARA," the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq., the Resource Conservation and Recovery Act, 49
U.S.C. Section 6901, et seq., or other applicable state or Federal
laws, rules, or regulations adopted pursuant to any of the foregoing.
Except as disclosed to and acknowledged by Lender in writing, Borrower
represents and warrants that: (a) During the period of Borrower's
ownership, lease or use of any real or personal properties and the
Collateral, there has been no use, generation, manufacturer, storage,
treatment, disposal, release or threatened release of any hazardous
waste or substance by any person on, under, or about any of the
properties, (b) Borrower has no knowledge of, or reason to believe that
there has been (i) any use, generation, manufacture, storage,
treatment, disposal, release, or threatened release of any hazardous
waste or substance by any prior owners or occupants of any of the
properties or the Collateral, or (ii) any actual or threatened
litigation or claims of any kind by any person relating to such
matters, (c) Neither Borrower nor any tenant, contractor, agent or
other authorized user of any of the properties or the Collateral shall
use, generate, manufacture, store, treat, dispose of, or release any
hazardous waste or substance on, under, or about any of the properties
or the Collateral; and any such activity shall be conducted in
compliance with all applicable federal, state, and local laws,
regulations, and ordinances, including without limitation those laws,
regulations and ordinances described above. Borrower authorizes Lender
and its agents to enter upon the properties to make such inspections
and tests as Lender may deem appropriate to determine compliance of the
properties with this section of the Agreement. Any inspections or tests
made by Lender shall be at Borrower's expense and for Lender's purposes
only and shall not be construed to create any responsibility or
liability on the part of Lender to Borrower or to any other person. The
representations and warranties contained herein are based on Borrower's
due diligence in investigating the Collateral and the properties for
hazardous wastes and substances. Borrower hereby (a) releases and
waives any future claims against Lender for indemnity or contribution
in the event Borrower becomes liable for cleanup or other costs under
any such laws, and (b) agrees to fully and promptly pay, perform,
discharge and defend, indemnify and hold harmless Lender against any
and all claims, orders, demands, causes of action, proceedings,
judgments, losses, liabilities, damages, penalties, and expenses which
Lender may directly or indirectly sustain or suffer resulting from a
breach of this section of the Agreement or as a consequence of any use,
generation, manufacture, storage, disposal, release or threatened
release occurring prior to Borrower's ownership or interest in the
properties or the Collateral, whether or not the same was or should
have been known to Borrower. The provisions of this section of the
Agreement, including the obligation to Indemnify, shall survive the
payment of the Indebtedness and the termination or expiration of this
Agreement and shall not be affected by Lender's acquisition of any
interest in any of the properties, whether by foreclosure or otherwise.
LITIGATION AND CLAIMS. No litigation, claim, investigation,
administrative proceeding or similar action (including those for unpaid
taxes) against Borrower is pending or threatened, and no other event
has occurred which may materially adversely affect Borrower's financial
condition or properties, other than litigation, claims, or other
events, if any, that have been disclosed to and acknowledged by Lender
in writing.
TAXES. To the best of Borrower's knowledge, all tax returns and reports
of Borrower that are or were required to be filed, have been filed, and
all taxes, assessments and other governmental charges have been paid in
full, except those presently being or to be contested by Borrower in
good faith in the ordinary course of business and for which adequate
reserves have been provided.
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08-20-1997 BUSINESS LOAN AGREEMENT PAGE 5
LOAN NO. 06200058706 (CONTINUED)
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LIEN PRIORITY. Unless otherwise previously disclosed to Lender in
writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security
Interests on or affecting any of the Collateral directly or indirectly
securing repayment of Borrower's Loan and Note, that would be prior or
that may in any way be superior to Lender's Security Interests and
rights in and to such Collateral.
BINDING EFFECT. This Agreement, the Note and all Security Agreements
directly or indirectly securing repayment of Borrower's Loan and Note
are binding upon Borrower as well as upon Borrower's successors,
representatives and assigns, and are legally enforceable in accordance
with their respective terms.
PERMITS. Borrower possesses and will continue to possess all permits,
licenses, copyrights, trademarks, trade names, patents and rights
thereto to conduct its business and its business does not conflict or
violate any valid rights of others with respect to the foregoing.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely
for business or commercial related purposes and will not purchase or
carry margin stock (within the meaning of Regulations G, T and U of the
Board of Governors of the Federal Reserve System).
Employee Benefit Plans. Each employee benefit plan as to which Borrower
may have any liability complies in all material respects with all
applicable requirements of law and regulations, and (i) no Reportable
Event nor Prohibited Transaction (as defined in ERISA) has occurred
with respect to any such plan, (ii) Borrower has not withdrawn from any
such plan or initiated steps to do so, (iii) no steps have been taken
to terminate any such plan, and (iv) there are no unfunded liabilities
other than those previously disclosed to Lender in writing.
LOCATION OF BORROWER'S OFFICES AND RECORDS. The chief place of business
of Borrower and the office or offices where Borrower keeps its records
concerning the Collateral is located at 1343 Main Street, 7th Floor,
Sarasota, FL 34236.
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender
will be, true and accurate in every material respect on the date as of
which such information is dated or certified; and none of such
information is dated or certified; and none of such information is or
will be incomplete by omitting to state any material fact necessary to
make such information not misleading.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and
agrees that Lender, without independent investigation, is relying upon
the above representations and warranties in extending Loan Advances to
Borrower. Borrower further agrees that the foregoing representations
and warranties shall be continuing in nature and shall remain in full
force and effect until such time as Borrower's Indebtedness shall be
paid in full, or until this Agreement shall be terminated in the manner
provided above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
LITIGATION. Promptly inform Lender in writing of (a) all material
adverse changes in Borrower's financial condition, and (b) all
litigation and claims and all threatened litigation and claims
affecting Borrower or
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08-20-1997 BUSINESS LOAN AGREEMENT PAGE 6
LOAN NO. 06200058706 (CONTINUED)
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any Guarantor which could materially affect the financial condition of
Borrower or the financial condition of any Guarantor.
UPDATES. Promptly inform Lender in writing of details of all
litigation, legal or administrative proceedings, investigation or other
action of similar nature, pending or threatened against Borrower, at
any time during the term of this Agreement, which in part or in whole
may or will render any of the above representations and warranties no
longer true, accurate and correct in each and every respect. Borrower
will bring such details to Lender's attention, in writing, within
thirty (30) days from the date Borrower acquires knowledge of same.
FINANCIAL RECORDS. Maintain its books and records in accordance with
GAAP and permit Lender to examine and audit Borrower's books and
records at all reasonable times.
FINANCIAL STATEMENTS. Furnish Lender with, as soon as available, but in
no event later than ninety (90) days after the end of each fiscal year,
Borrower's balance sheet and income statement of cash flow and notes to
statements for the year ended, compiled by a certified public
accountant satisfactory to Lender, and, as soon as available, but in no
event later than thirty (30) days after the end of each fiscal quarter,
Borrower's balance sheet and profit and loss statement for the period
ended, prepared and certified as correct to the best knowledge and
belief by Borrower's chief financial officer or person acceptable to
Lender. All financial reports required to be provided under this
Agreement shall be prepared in accordance with GAAP and certified by
Borrower as being true and correct. Provide to Lender annually for each
Individual Borrower and Guarantor, if any, signed and dated personal
financial statements on Lender's forms, and, immediately after filing,
the personal income tax return filed for the past calendar year.
Simultaneously with the financial information required herein of
Borrower, the same information of all corporate or partnership
guarantors, if any, prepared in accordance with GAAP.
Promptly after the furnishing thereof, provide Lender with copies of
any statement or report furnished to any other party pursuant to the
terms of any Indenture, loan, credit, or similar agreement and not
otherwise required to be furnished to Lender pursuant to any other
section of this Agreement.
Promptly after the sending or filing thereof, provide Lender with
copies of all proxy statements, financial statements and reports which
Borrower sends to its stockholder, and copies of all regular, periodic,
special reports, and all registration statements which Borrower files
with the Securities and Exchange Commission or any governmental
authority which may be submitted therefor, or with any national
securities exchange.
ADDITIONAL INFORMATION. Furnish such additional information and
statements, lists of assets and liabilities, agings of receivables and
payables, inventory schedules, budgets, forecasts, tax returns, and
other reports with respect to Borrower's financial condition and
business operations as Lender may request from time to time.
INSURANCE. Maintain fire and other risk insurance, business
interruption, theft, public liability insurance, and such other
insurance in such amounts and covering such risks as are usually
covered by businesses engaged in the same or a similar business and
similarly situated with respect to Borrower's properties and
operations, in form, coverages and with insurance companies reasonably
acceptable to Lender. Borrower, upon request of Lender, will deliver to
Lender from time to time the policies or certificates of insurance in
form satisfactory to Lender, including stipulations that coverages will
not be canceled or diminished without at least thirty (30) days' prior
written notice to Lender. In connection with all policies covering
assets in which Lender holds or is offered a security interest for the
Loans, Borrower will provide Lender with such loss payable or other
endorsements as Lender may require.
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08-20-1997 BUSINESS LOAN AGREEMENT PAGE 7
LOAN NO. 06200058706 (CONTINUED)
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INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports
on each existing insurance policy showing such information as Lender
may reasonably request, including without limitation the following: (a)
the name of the Insurer; (b) the risks insured; (c) the amount of the
policy; (d) the properties insured; (e) the then current property
values on the basis of which insurance has been obtained, and the
manner of determining those values; and (f) the expiration date of the
policy. In addition, upon request of Lender (however not more often
than annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash value
or replacement cost of any Collateral. The cost of such appraisal shall
be paid by Borrower.
GUARANTIES. Prior to disbursement of any Loan proceeds, furnish
executed guaranties of the Loans in favor of Lender, on Lender's forms,
and in the amount and by the guarantor named below:
GUARANTOR AMOUNT
--------- ------
Steven R. Matzkin Unlimited
OTHER AGREEMENTS. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default in
connection with any other such agreements.
LOAN PROCEEDS. Use all Loan proceeds solely for the following specific
purposes: Dental practice acquisition.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all
assessments, taxes, governmental charges, levies and liens, of every
kind and nature, imposed upon Borrower or its properties, income, or
profits, prior to the date on which penalties would attach, and all
lawful claims that, if unpaid, might become a lien or charge upon any
of Borrower's properties, income, or profits. Provided however,
Borrower will not be required to pay and discharge any such assessment,
tax, charge, levy, lien or claim so long as (a) the legality of the
same shall be contested in good faith by appropriate proceedings, and
(b) Borrower shall have established on its books adequate reserves with
respect to such contested assessment, tax, charge, levy, lien, or claim
in accordance with generally accepted accounting practices. Borrower,
upon demand of Lender, will furnish to Lender evidence of payment of
the assessments, taxes, charges, levies, liens and claims and will
authorize the appropriate governmental official to deliver to Lender at
any time a written statement of any assessments, taxes, charges,
levies, liens and claims against Borrower's properties, income, or
profits.
PERFORMANCE. Perform and comply with all terms, conditions, and
provisions set forth in this Agreement and in the Related Documents in
a timely manner, and promptly notify Lender if Borrower learns of the
occurrence of any event which constitutes an Event of Default under
this Agreement or under any of the Related Documents.
OPERATIONS. Substantially maintain its present executive and management
personnel; conduct its business affairs in a reasonable and prudent
manner and in compliance with all applicable federal, state and
municipal laws, ordinances, rules and regulations respecting its
properties, chargers, businesses and operations, including without
limitation, compliance with the Americans With Disabilities Act and
with all minimum funding standards and other requirements of ERISA and
other laws applicable to Borrower's employee benefit plans, and
continue to engage in an efficient and economical manner in a business
of the same general type as now conducted by it, provided, however,
that nothing contained in this Agreement shall prevent Borrower from
discontinuing any part of Borrower's business, if in Borrower's
opinion, this discontinuance is in the best interests of Borrower and
not disadvantageous to Lender.
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LOAN NO. 06200058706 (CONTINUED)
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MAINTENANCE. Maintain, keep and preserve Borrower's buildings and
properties and every part thereof in good repair, working order, and
condition and from time to time make all needful and proper repairs,
renewals, replacements, additions, betterments and improvements
thereto, so that at all times the efficiency thereof shall be fully
preserved and maintained, ordinary wear and tear excepted.
INSPECTION. Permit employees or agents of Lender at any reasonable time
to inspect any and all collateral for the Loan or Loans and Borrower's
other properties and to examine or audit Borrower's books, accounts and
records and to make copies and memoranda of Borrower's books accounts
and records. If Borrower now or at any time hereafter maintains any
records (including without limitation computer generated records and
computer software programs for the generation of such records) in the
possession of a third party, Borrower, upon request of Lender, shall
notify such party to permit Lender free access to such records at all
reasonable times and to provide Lender with copies of any records it
may request, all at Borrower's expense, and discuss the affairs,
finances and accounts of Borrower with Lender.
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide
Lender upon Lender's request a compliance certificate executed by
Borrower's chief financial officer, or other officer or person
acceptable to Lender, certifying that the representations and
warranties set forth in this Agreement are true and correct as of the
date of the certificate and further certifying that, as of the date of
the certificate, no default or Event of Default has occurred, or has
occurred and is continuing under this Agreement.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all
respects with all environmental protection federal, state and local
laws, statutes, regulations and ordinances; not cause or permit to
exist, as a result of an intentional or unintentional action or
omission on its part or on the part of any third party, on property
owned and/or occupied by Borrower, any environmental activity where
damage may result to the environment, unless such environmental
activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within
thirty (30) days after receipt thereof a copy of any notice, summons,
lien, citation, directive, letter or other communication from any
governmental agency or instrumentality concerning any intentional or
unintentional action or omission on Borrower's part in connection with
any environmental activity whether or not there is damage to the
environment and/or other natural resources.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements,
financing statements, instruments, documents and other agreements as
Lender or its attorneys may reasonably request to evidence and secure
the Loans and to perfect all Security Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that
while this Agreement is in effect, Borrower shall not, without the
prior written consent of Lender.
INDEBTEDNESS. Except for trade debt incurred in the normal course of
business, and indebtedness to Lender contemplated by this Agreement,
create, incur or assume indebtedness for borrowed money, including
capital leases.
CONTINUITY OF OPERATIONS. (a) Engage in any business activities
substantially different than those in which Borrower is presently
engaged, (b) cease operations, wind up, liquidate, merge, reorganize,
transfer, acquire or consolidate with any other entity, change
ownership, dissolve, transfer or sell or acquire Collateral or assets
out of the ordinary course of business, or (c) pay, declare, set aside,
or allocate any dividends in cash or other property, on Borrower's
stock (however, if Borrower is a Subchapter S corporation, Borrower may
make distributions to each shareholder which is necessary to pay for
any personal income tax liability incurred by that shareholder as a
direct result of profits generated by the
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08-20-1997 BUSINESS LOAN AGREEMENT PAGE 9
LOAN NO. 06200058706 (CONTINUED)
================================================================================
Subchapter S corporation) or purchase or retire any of Borrower's
outstanding shares or alter or amend Borrower's capital structure.
LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance
money or assets, (b) purchase, create or acquire any interest in any
other enterprise or entity, or (c) assume, endorse, be liable for or
incur any agreement or obligation as surety or guarantor.
CESSATION OF ADVANCES. If Lender has made any commitment to make any
Loan to Borrower whether under this Agreement or under any other
agreement, Lender shall have no obligation to make Loan Advances or to
disburse Loan proceeds if: (a) Borrower or any Guarantor is in default
under the terms of this Agreement or any of the Related Documents or
any other agreement that Borrower or any Guarantor has with Lender; (b)
Borrower or any Guarantor becomes insolvent, has a petition in
bankruptcy or similar proceedings, or is adjudged a bankrupt; (c) there
occurs a material adverse change in Borrower's financial condition, in
the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; (d) any Guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such Guarantor's guaranty
of the Loan or any other loan with Lender; or (e) Lender in good faith
deems itself insecure even though no Event of Default shall have
occurred.
CONDITIONS PRECEDENT ADVANCE. Borrower shall provide financial
information on the dental practice(s) to be acquired to include at a
minimum the immediate past two year-end tax returns and/or CPA compiled
financial statements plus a company prepared interim financial
statement if more than 180 days have passed since the year-end. Based
on the information provided, the "to be acquired" practice must
generate sufficient cash flows to have a debt service coverage of 1.25
times at a minimum for all proposed debt.
Any advance shall not exceed 80% of the cost of the acquiring each
practice, as evidenced by the Purchase Agreement.
Any fundings will be limited to the purchase of tangible assets only.
RIGHT OF SETOFF. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge, withdraw or setoff all sums owing on this
Agreement against any and all the accounts set forth below in the
Accounts section without prior demand or notice to Borrower.
ACCOUNTS. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and
transfers to Lender all of Borrower's right, title and interest in and
to, Borrower's deposits, accounts (whether checking, savings, or some
other account), or securities now or hereafter in the possession of or
on deposit with Lender or with any Barnett Banks, Inc. affiliate or
subsidiary including without limitation all accounts held jointly with
someone else and all accounts Borrower may open in the future,
excluding however all IRA, Keogh, and trust accounts.
EVENTS OF DEFAULT. If any of the following events shall occur each
shall constitute an Event of Default under this Agreement:
DEFAULT ON INDEBTEDNESS. An event of default as defined in any Loan or
Note or demand for full payment of any Loan or Note.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or
failure of Borrower to comply with or to perform any other term,
obligation, covenant or condition contained in any other agreement
between Lender and Borrower. If any Affirmative Covenant herein is
breached, and if Borrower or Grantor, as the case may be, has not been
given a notice of a similar breach
<PAGE>
08-20-1997 BUSINESS LOAN AGREEMENT PAGE 10
LOAN NO. 06200058706 (CONTINUED)
================================================================================
within the preceding twelve (12) months, it may be cured (and no Event
of Default will have occurred) if Borrower or Grantor, as the case may
be, after receiving written notice from Lender demanding cure of such
failure: (a) cures the failure within thirty (30) days; or (b) if the
cure requires more than thirty (30) days, immediately initiates steps
which Lender deems in Lender's sole discretion to be sufficient to cure
the failure and thereafter continues and completes all reasonable and
necessary steps sufficient to produce compliance as soon as reasonably
practical.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any grantor
default under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any
other creditor or person that may materially affect any of Borrower's
property or Borrower's or Borrower's or any Grantor's ability to repay
the Loans or perform their respective obligations under this Agreement
or any of the Related Documents.
FALSE STATEMENTS. Any warranty, representation, or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under
this Agreement or the Related Documents is false or misleading in any
material respect, either now or at the time made or furnished.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of
any Security Agreement to create a valid and perfected Security
Interest) at any time and for any reason.)
INSOLVENCY. The dissolution or termination of Borrower's existence as a
going business, insolvency, appointment of a receiver for any part of
Borrower's property, any assignment for the benefit of creditor, and
type of creditor workout, or the commencement of any proceeding under
any bankruptcy or insolvency laws by or against Borrower.
CREDITOR PROCEEDINGS. Commencement of foreclosure proceedings, whether
by judicial proceeding, self-help, repossession or any other method, by
any creditor of Borrower, any creditor of any grantor of collateral for
the Loan. This includes a garnishment, attachment, or levy on or of any
of Borrower's deposit accounts with Lender. However, this Event of
Default shall not apply if there is a good faith dispute by Borrower or
Grantor, as the case may be, as to the validity or reasonableness of
the claim which is the basis of the creditor proceeding, and if
Borrower or Grantor gives Lender written notice of the creditor
proceeding and furnishes reserves or a surety bond for the creditor
proceeding satisfactory to Lender.
FORFEITURE. The filing of formal charges under any federal or state law
against any Borrower which forfeiture is the penalty. However, this
Event of Default shall not apply if there is a good faith dispute by
Borrower as to the validity or reasonableness of the claim which is the
basis of the proceeding, and if Borrower gives Lender written notice of
the proceeding and furnishes reserves or a surety bond for the
proceeding satisfactory to Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the indebtedness or such Guarantor
dies or becomes incompetent. Lender, at its option, may, but shall not
be required to, permit the Guarantor's estate to assume unconditionally
the obligations arising under the guaranty in a manner satisfactory to
Lender, and, in doing so, cure the Event of Default.
Insecurity, Lender, in good faith, deems itself insecure.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur,
except where otherwise provided in this Agreement or the Related
Documents, all commitments and obligations of Lender under this
Agreement or
<PAGE>
08-20-1997 BUSINESS LOAN AGREEMENT PAGE 11
LOAN NO. 06200058706 (CONTINUED)
================================================================================
the Related Documents or any other agreement immediately will terminate
(including any obligation to make Loan Advances or disbursements), and,
at Lender's option, all indebtedness immediately will become due and
payable, all without notice of any kind to Borrower, except that in the
case of an Event of Default of the type described in the "Insolvency"
subsection above, such acceleration shall be automatic and not
optional. In addition, Lender shall have all the rights and remedies
provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of
Lender's rights and remedies shall be cumulative and may be exercised
singularly or concurrently. Election by Lender to pursue any remedy
shall not exclude pursuit of any other remedy, and an election to make
expenditures or to take action to perform an obligation of Borrower or
of any Grantor shall not affect Lender's right to declare a default and
to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a
part of this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement and supersedes all prior
understandings and correspondence, oral or written, with respect to the
subject matter hereof. No alteration of or amendment to this Agreement
shall be effective unless given in writing and signed by the party or
parties sought to be charged or bound by the alteration or amendment.
APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
CAPTION HEADINGS. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define
the provisions of this Agreement.
CONTINUING AGREEMENT. This Agreement is a continuing agreement and
shall continue in effect notwithstanding that from time to time, no
indebtedness may exist.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation
whatsoever, to any one or more purchasers, or potential purchasers, any
information or knowledge Lender may have about Borrower or about any
other matte relating tot he Loan, and Borrower hereby waives any rights
to privacy it may have with respect to such matters. Borrower
additionally waives any and all notices of sale of participation
interests, as well as all notices of any repurchase of such
participation interests. Borrower further waives all rights of offset
or counterclaim that it may have now or later against Lender or against
any purchaser of such a participation interest and unconditionally
agrees that either Lender or such purchaser may enforce Borrower's
obligation under the Loan irrespective of the failure or insolvency of
any holder of any interest in the Loans. Borrower further agrees that
the purchaser or any such participation interests may enforce its
interests irrespective of any personal claims or defenses that Borrower
may have against Lender.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
out-of-pocket expenses, including reasonable attorneys' fees, incurred
in connection with the preparation, execution, enforcement and
collection of this Agreement or in connection with the Loans made
pursuant to this Agreement. Lender may pay someone else to help collect
the Loans and to enforce this Agreement, and Borrower will pay that
amount. This includes, subject to any limits under applicable law,
Lender's reasonable attorneys' fees and Lender's legal expenses,
whether or not there is a lawsuit, including reasonable attorneys' fees
for bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Borrower also will pay any court
costs, in addition to all other sums provided by law.
<PAGE>
08-20-1997 BUSINESS LOAN AGREEMENT PAGE 12
LOAN NO. 06200058706 (CONTINUED)
================================================================================
NOTICES. All notices required to be given under this Agreement shall be
given in writing and shall be effective when actually delivered or when
deposited with a nationally recognized overnight courier or deposited
in the United States registered or certified mail, first class, postage
prepaid, return receipt requested, addressed to the party to whom the
notice is to be given at the address shown above; notification by
facsimile is specifically not allowed. Any party may change its address
for notices under this Agreement by giving formal written notice to the
other parties, specifying that the purpose of the notice is to change
notice to all Borrowers. For notice purposes, Borrower agrees to keep
Lender informed at all times of Borrower's current address(es).
SEVERABILITY. If a court of competent jurisdiction finds any provision
of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible,
any such offending provision shall be deemed to be modified to be
within the limits of enforceability or validity; however, if the
offending provision cannot be so modified, it shall be stricken and all
other provisions of this Agreement in all other respects shall remain
valid and enforceable.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall
inure to the benefit of Lender, its successors and assigns. Borrower
shall not, however, have the right to assign its rights under this
Agreement or any interest therein, without the prior written consent of
Lender.
SURVIVAL. All warranties, representations, and covenants made by
Borrower in this Agreement or in any certificate or other instrument
delivered by Borrower to Lender under this Agreement shall be
considered to have been relied upon by Lender and will survive the
making of the Loan and delivery to Lender of the Related Documents,
regardless of any investigation made by Lender or on Lender's behalf.
TIME. Time is of the essence in the performance of this Agreement.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender.
No delay or omission on the part of Lender in exercising any right
shall operate as a waiver of such right or any other right. A waiver by
Lender of a provision of this Agreement shall not prejudice or
constitute a waiver of Lender's right otherwise to demand strict
compliance with that provision or any other provision of this
Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Borrower, or between Lender and any Grantor, shall
constitute a waiver of any of Lender's rights or of any obligations of
Borrower or of any Grantor as to any future transactions. Whenever the
consent of Lender is required under this Agreement, the granting of
such consent by Lender in any instance shall not constitute continuing
consent in subsequent instances where such consent is required, and in
all cases such consent may be granted or withheld in the sole
discretion of Lender.
<PAGE>
08-20-1997 BUSINESS LOAN AGREEMENT PAGE 13
LOAN NO. 06200058706 (CONTINUED)
================================================================================
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
AUGUST 20, 1997.
BORROWER:
DENTAL CARE ALLIANCE, INC.
BY: /s/ STEVEN R. MATZKIN
-------------------------
Steven R. Matzkin, President
LENDER:
BARNETT BANK, N.A.
By:
-------------------------
Authorized Officer
EXHIBIT 10.24
DENTAL CARE ALLIANCE, INC.
1343 MAIN STREET, 7TH FLOOR
SARASOTA, FLORIDA 34236
August __, 1997
J. Francis Lavelle
The Nassau Group, Inc.
18 Kings Highway North
Westport, Connecticut 06880
Dear Jim:
This letter clarifies certain matters and confirms our agreement to
terminate that certain letter agreement dated September 29, 1995, as amended on
April 26, 1996 (the "Nassau Agreement"), between The Nassau Group, Inc.
("Nassau") and Dental Care Alliance, Inc. (the "Company") and the letter
agreement dated September 29, 1995 (the "Lavelle Agreement") between J. Francis
Lavelle ("Lavelle") and the Company. The Nassau Agreement and the Lavelle
Agreement are hereinafter collectively referred to as the "Agreements."
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to them in the Agreements.
NOW, THEREFORE, in consideration of the facts, mutual provisions and
convenants contained herein, the parties intending to be legally bound, hereby
agree as follows:
1. Nassau's option to purchase the Retainer Stock has been exercised in
full. The registration rights respecting the Retainer Stock are set forth in
that certain Equity Holders Agreement dated April 30, 1997 between Nassau and
the Company (the "Nassau Equity Holders Agreement"). Lavelle's option to
purchase Common Stock pursuant to the Lavelle Agreement has been exercised in
full. The registration rights respecting such shares are set forth in that
certain Equity Holders Agreement dated April 30, 1997, between Lavelle and the
Company (the "Lavelle Equity Holders Agreement"). The Nassau Equity Holders
Agreement and the Lavelle Equity Holders Agreement are hereinafter collectively
referred to as the "Equity Holders Agreements." No registration rights were
attached as Exhibit A to the Agreements. The Company hereby acknowledges that
Nassau has transferred all of its right, title and interest in the Retainer
Stock to Lavelle, and that Nassau has assigned all of its rights under the
Nassau Equity Holders Agreement to Lavelle. The Company hereby consents to such
transfer and such assignment.
2. Upon your execution hereof, the Agreements shall be terminated and
of no further force or effect, except with respect to the indemnification
provisions contained in Section 4 of the Nassau Agreement, which shall continue
in effect in accordance with their terms, and except that Nassau shall be
entitled to receive the M&A Warrant in accordance with the terms of the Nassau
Letter (as modified by this Agreement) for services being provided in connection
with such a transaction if the Company (i) does not consummate an initial public
offering within 18 months from the date hereof and (ii) consummates an M&A
Transaction within 18 months from the date hereof.
3. Both Nassau and Lavelle acknowledge and agree that, except as
expressly set forth herein, they have no further rights pursuant to the
Agreements, including as they relate to the 18 Month Warrant, the IPO Warrant,
the M&A Warrant or any warrant issued in connection with a Shell Company
Transaction, or in connection with a Capital Raising Transaction, and that they
have no other equity interest in the Company except for the 1,040 shares of
pre-stock split Common Stock purchased pursuant
<PAGE>
J. Francis Lavelle
The Nassau Group, Inc.
August __, 1997
Page 2
to the options referred to by the parties in Section 1 of this Agreement and as
granted pursuant to a letter agreement entered into by the parties
simultaneously herewith (the "Other Letter Agreement"). Each of Nassau and
Lavelle also acknowledge that, except as set forth in the Other Letter
Agreement, they have no other rights to fees from the Company under the
Agreements, including any right to an IPO Transaction Fee or pursuant to a
Capital Raising Transaction.
4. This Agreement supersedes all prior agreements, understandings,
negotiations and discussions, both written and oral, between the parties with
respect to the subject matter hereof.
If the foregoing correctly sets forth your understanding with respect
to the subject matter hereof, please so indicate by signing below.
Very truly yours,
Dental Care Alliance, Inc.
By:
--------------------------------------------
Name: Dr. Steven R. Matzkin
Title: President and Chief Executive Officer
Acknowledged and Agreed:
The Nassau Group, Inc.
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
- --------------------------------------
J. Francis Lavelle
EXHIBIT 10.25
ACKNOWLEDGEMENT AND OPTION
AGREEMENT
Whereas Dennis Corona, D.D.S., P.C. ("Corona PC") and Andrew D. Levine,
D.D.S., P.A. ("Levine PA") have entered into an Asset Purchase Agreement
pursuant to which Corona PC has executed a promissory note in the amount of
$328,000 in favor of Levine PA (the "Note")
Whereas, in the event Dental Care Alliance, Inc. a Delaware corporation
("the Company"), consummates an initial public offering ("IPO"), then, pursuant
to the Asset Purchase Agreement, Levine PA shall have the option, for six
months, to elect to receive common stock (post-stock split), $.01 par value
("the Common Stock"), of the Company in satisfaction of a portion of the Note
(the "Share Election"); and
Whereas, in connection with the foregoing, Corona PC and the Company
agree that Corona PC is to provide the Common Stock to be received by Levine PA
pursuant to the Share Election, and that Corona PC shall have an option, as set
forth below, to purchase such Common Stock from the Company for such period at
the public offering price for shares of Common Stock in the IPO (the "IPO
Price").
1. ACKNOWLEDGMENT. Corona PC acknowledges that it is responsible for
providing the Common Stock to be delivered pursuant to the Asset Purchase
Agreement, upon the election of Levine PA, in partial satisfaction of the Note.
2. GRANT OF OPTION. As of the 1st day of April, 1997, the Company hereby
grants to Corona PC, a nonstatutory stock option (the "Option") to acquire that
number of shares of Common Stock equal to $82,000 divided by the IPO price (the
"Shares").
3. EXERCISE PRICE. The exercise price per share of the Shares subject to
this Option shall be the IPO Price. The exercise price for the Shares subject to
this Option shall be paid in cash.
4. TERM; CONDITIONS. This Option shall be exercisable in whole or in part
immediately upon consummation by the Company of an IPO and for a period of six
months thereafter. This Option shall not be exercisable if the Company does not
consummate an IPO or if the Company does not previously receive a release from
Levine PA of any responsibilities to provide shares of Common Stock to satisfy
the Share Election.
5. TRANSFERABILITY. This Option is not transferable except to an assignee
of Corona PC under the Asset Purchase Agreement.
6. TERMINATION OF OPTION. Any unexercised portion of this Option shall
automatically and without notice terminate and become null and void.
7. SHARE CERTIFICATES. Upon each exercise of any Option, the company will
cause one or more stock certificates evidencing Corona PC's ownership of Shares
to be issued to Corona PC. The Company shall cause the following legend to be
placed upon each stock certificate representing the Shares:
"The shares represented by this certificate have been acquired
directly or indirectly from the Issuer or an affiliate of the
Issuer without being registered under the Securities Act of
1933, as amended ("Act"), or the securities laws of any state
or other jurisdictions, including the Florida Securities Act,
and are restricted securities as that term is defined under
Rule 144 promulgated under the Act. These shares may not be
sold, transferred, pledged, hypothecated or otherwise disposed
of in any manner ("Transfer") unless they are registered under
such Act and the securities laws of all applicable states and
other jurisdictions or unless the request for Transfer is
accompanied by a favorable opinion of counsel satisfactory to
the Issuer, stating that such Transfer will not result in a
violation of such laws."
8. LAW GOVERNING. This Agreement shall be governed in accordance with and
governed by the internal laws of the State of Delaware.
9. INTERPRETATION. Corona PC accepts this Option subject to all the terms
and provisions of this Agreement. The undersigned Corona PC hereby accepts as
binding, conclusive and final all decisions or interpretations of the Company
upon any questions arising under this Agreement.
10. NOTICES. Any notice under this Agreement shall be in writing and shall
be deemed to have been duly given when delivered personally or when deposited in
the United States mail, registered, postage prepaid, and addressed, in the case
of the Company, to the Company's Secretary at 1343 Main Street, 7th Floor,
Sarasota, Florida 34236, or if the Company should move its principal office,
and, in the case of Corona PC, to Corona PC's last permanent address as shown on
the Company's records, subject to the right of either party to designate some
other address at any time hereafter in a notice satisfying the requirements of
this Section.
COMPANY:
DENTAL CARE ALLIANCE, INC.
By: /s/ [ILLEGIBLE]
-----------------------------------------
CORONA PC:
DENNIS CORONA D.D.S., P.C.
By: /s/ [ILLEGIBLE]
-----------------------------------------
EXHIBIT 10.26
ACKNOWLEDGEMENT AND OPTION
AGREEMENT
Whereas Dennis Corona, D.D.S., P.C. ("Corona PC") and Jay Walton, P.C.
or a professional corporation owned by Jay Walton ("Walton PC") have entered
into an Asset Purchase Agreement pursuant to which Corona PC has executed a
promissory note in the amount of $525,000 in favor of Walton PC (the "Note")
Whereas, in the event Dental Care Alliance, Inc. a Delaware corporation
("the Company"), consummates an initial public offering ("IPO"), then, pursuant
to the Asset Purchase Agreement, Walton PC shall have the option, for six
months, to elect to receive common stock (post-stock split), $.01 par value
("the Common Stock"), of the Company in satisfaction of a portion of the Note
(the "Share Election"); and
Whereas, in connection with the foregoing, Corona PC and the Company
agree that Corona PC is to provide the Common Stock to be received by Walton PC
pursuant to the Share Election, and that Corona PC shall have an option, as set
forth below, to purchase such Common Stock from the Company for such period at
the public offering price for shares of Common Stock in the IPO (the "IPO
Price").
1. ACKNOWLEDGMENT. Corona PC acknowledges that it is responsible for
providing the Common Stock to be delivered pursuant to the Asset Purchase
Agreement, upon the election of Walton PC, in partial satisfaction of the Note.
2. GRANT OF OPTION. As of the 21st day of August, 1997, the Company hereby
grants to Corona PC, a nonstatutory stock option (the "Option") to acquire that
number of shares of Common Stock equal to $131,250 divided by the IPO price (the
"Shares").
3. EXERCISE PRICE. The exercise price per share of the Shares subject to
this Option shall be the IPO Price. The exercise price for the Shares subject to
this Option shall be paid in cash.
4. TERM; CONDITIONS. This Option shall be exercisable in whole or in part
immediately upon consummation by the Company of an IPO and for a period of six
months thereafter. This Option shall not be exercisable if the Company does not
consummate an IPO or if the Company does not previously receive a release from
Walton PC of any responsibilities to provide shares of Common Stock to satisfy
the Share Election.
5. TRANSFERABILITY. This Option is not transferable except to an assignee
of Corona PC under the Asset Purchase Agreement.
6. TERMINATION OF OPTION. Any unexercised portion of this Option shall
automatically and without notice terminate and become null and void.
7. SHARE CERTIFICATES. Upon each exercise of any Option, the company will
cause one or more stock certificates evidencing Corona PC's ownership of Shares
to be issued to Corona PC. The Company shall cause the following legend to be
placed upon each stock certificate representing the Shares:
"The shares represented by this certificate have been acquired
directly or indirectly from the Issuer or an affiliate of the
Issuer without being registered under the Securities Act of
1933, as amended ("Act"), or the securities laws of any state
or other jurisdictions, including the Florida Securities Act,
and are restricted securities as that term is defined under
Rule 144 promulgated under the Act. These shares may not be
sold, transferred, pledged, hypothecated or otherwise disposed
of in any manner ("Transfer") unless they are registered under
such Act and the securities laws of all applicable states and
other jurisdictions or unless the request for Transfer is
accompanied by a favorable opinion of counsel satisfactory to
the Issuer, stating that such Transfer will not result in a
violation of such laws."
8. LAW GOVERNING. This Agreement shall be governed in accordance with and
governed by the internal laws of the State of Delaware.
9. INTERPRETATION. Corona PC accepts this Option subject to all the terms
and provisions of this Agreement. The undersigned Corona PC hereby accepts as
binding, conclusive and final all decisions or interpretations of the Company
upon any questions arising under this Agreement.
10. NOTICES. Any notice under this Agreement shall be in writing and shall
be deemed to have been duly given when delivered personally or when deposited in
the United States mail, registered, postage prepaid, and addressed, in the case
of the Company, to the Company's Secretary at 1343 Main Street, 7th Floor,
Sarasota, Florida 34236, or if the Company should move its principal office,
and, in the case of Corona PC, to Corona PC's last permanent address as shown on
the Company's records, subject to the right of either party to designate some
other address at any time hereafter in a notice satisfying the requirements of
this Section.
COMPANY:
DENTAL CARE ALLIANCE, INC.
By: /s/ [ILLEGIBLE]
-----------------------------------------
CORONA PC:
DENNIS CORONA D.D.S., P.C.
By: /s/ [ILLEGIBLE]
-----------------------------------------
<TABLE>
<CAPTION>
EXHIBIT 11.1
DENTAL CARE ALLIANCE, INC.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
DECEMBER 31,
------------------------------- JUNE 30,
1994 1995 1996 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Common shares 3,995,460 3,995,460 3,995,460 3,995,460
Preferred shares convertible to common(1) 654,359 654,359 654,359 654,359
Stock options(1) 49,576 49,576 49,576 49,576
Common shares, including warrants and
options and conversion of preferred 4,773,107 4,773,107 4,773,107 4,773,107
Pro forma, including common, preferred,
warrants and options 4,773,071 4,773,071 4,773,071 4,773,071
Net income (loss) applicable to common 127,476 74,903 4,280 (10,889)
Adjustment to redemption value of
common and preferred securities 39,951 85,709 (191,237) (10,500)
Cumulative preferred stock dividend - - (6,485) (60,000)
HISTORICAL
Net income 87,525 (10,806) 202,002 59,611
Weighted shares 4,773,071 4,773,071 4,773,071 4,773,071
Net income (loss) per share 0.02 (0.00) 0.04 0.01
PRO FORMA
Pro forma net income 146,437 59,611
Weighted shares 4,773,107 4,773,107
Net income (loss) per share 0.03 0.01
</TABLE>
- ----------------
(1) Treated as outstanding in all periods.
Note: Shares will be issued to an advisor, equal to $350,000 divided by the
IPO price and to a PA equal to 213,000 divided by the IPO price only upon
the offering becoming effective.
EXHIBIT 16.1
ARTHUR
ANDERSEN
[LETTERHEAD]
____________________________
September 9, 1997 Arthur Andersen LLP
____________________________
Suite 2200
Mr. David Nichols 101 East Kennedy Boulevard
Chief Financial Officer Tampa, Florida 33602-5141
Dental Care Alliance 813 222 4600
1343 Main Street, 7th Floor
Sarasota, Florida 34236
Dear Dave:
We have read the Experts section of the Form S-1 which you faxed to us. We are
in agreement with the statements contained therein.
Very truly yours,
ARTHUR ANDERSEN LLP
By: /s/ ARTHUR ANDERSEN, LLP
-------------------------
Michael H. Blount
NCK
EXHIBIT 21.1
SUBSIDIARIES:
Dental Care Alliance of Florida, Inc.
Dental Care Alliance of Michigan, Inc.
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of
this Registration Statement on Form S-1 of our report dated August 26, 1997,
relating to the financial statements of Dental Care Alliance, Inc., which
appears in such Prospectus. We also consent to the references to us under the
headings "Experts" and "Selected Financial Data" in such Prospectus. However, it
should be noted that Price Waterhouse LLP has not prepared or certified such
"Selected Financial Data."
/s/ PRICE WATERHOUSE LLP
- ------------------------
Price Waterhouse LLP
Tampa, Florida
October 6, 1997
EXHIBIT 24.2
POWER OF ATTORNEY
The undersigned director of Dental Care Alliance, Inc. hereby
constitutes and appoints Steven R. Matzkin and Mitchell Olan and each of them,
with full power to act without the other and with full power of substitution and
resubstitution, his true and lawful attorneys-in-fact and agents with full power
to execute in his name and behalf in the capacity indicated below any and all
amendments (including 462(b) Amendments, post-effective amendments and
amendments thereto) to the Registration Statement on Form S-1 for Dental Care
Alliance, Inc. and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully in all intents and
purposes as he might or could do in person, and hereby ratifies and confirms
that such attorneys-in-fact, or either of them, or their substitutes shall
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Power of
Attorney has been signed by the following person in the capacity and on the date
indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ ROBERT F. RAUCCI Director September 12 1997
- ----------------------
Robert F. Raucci
