<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ________ to ________
Commission File Number 0-20222
PRINCETON DENTAL MANAGEMENT CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 36-3484607
------------------------------ ----------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
7421 West 100th Place, Bridgeview, Illinois 60455-2442
(Address of principal executive offices)
(Zip Code)
(708) 974-4000
(Registrant's telephone number, including area code)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR SUCH SHORTER PERIOD THAT THE REGISTRANT
WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS, YES X NO
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE: 10,122,323 SHARES OF THE
COMPANY'S COMMON STOCK ($.0001 PAR VALUE) PER SHARE OUTSTANDING AS OF
JUNE 30, 1997.
<PAGE> 2
PRINCETON DENTAL MANAGEMENT CORPORATION
FORM 10-QSB
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE (S)
CONDENSED CONSOLIDATED BALANCE SHEETS 3-4
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 7-9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9-11
PART II - OTHER INFORMATION 11-15
<PAGE> 3
PRINCETON DENTAL MANAGEMENT CORPORATION
Condensed Consolidated Balance Sheets
For Six Months Ending June 30, 1997 and Year Ending December 31, 1996
<TABLE>
<CAPTION>
ASSETS June 30, 1997 December 31, 1996
------------- -----------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash Equivalents $ 512,838 $ 185,235
Accounts Receivable, net of allowances
for doubtful accounts of $301,336 and
$265,000 respectively 1,040,799 1,170,640
Current portion of loan receivable - affiliate 9,991 9,991
Inventories 122,421 105,193
Other Current Assets 93,754 95,847
----------- -----------
Total Current Assets 1,779,803 1,566,906
Property and equipment, net 810,957 1,159,524
Goodwill, net of accumulated amortization of
$1,880,295 and $1,829,516, respectively 5,723,273 7,002,192
Loan Receivable - affiliate 6,416 10,820
Other Assets, net 934,276 543,512
----------- -----------
Total Other Assets 7,474,922 8,716,048
----------- -----------
Total Assets $ 9,254,725 $10,282,954
=========== ===========
</TABLE>
<PAGE> 4
PRINCETON DENTAL MANAGEMENT CORPORATION
Condensed Consolidated Balance Sheets
For Six Months Ending June 30, 1997 and Year Ending December 31, 1996
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDER'S EQUITY June 30, 1997 December 31, 1996
------------- -----------------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Notes Payable $ 85,689 $ 179,000
Notes Payable to shareholders 122,948 122,948
Current portion of capital lease obligations 18,036 25,883
Current portion of long-term debt 715,806 715,806
Convertible secured debt 2,115,924 2,115,924
Accounts Payable 1,225,810 1,442,487
Accrued salaries and wages 665,273 743,958
Other accrued expenses 838,652 583,142
------------ ------------
Total Current Liabilities 5,788,138 5,929,148
Long-term debt, excluding current portion 2,432,867 3,267,106
Capital lease obligations, excluding current portion 24,277 38,145
------------ ------------
Total Liabilities 8,245,282 9,234,399
------------ ------------
Shareholder's Equity:
Series A 11.75% Cumulative Convertible
Preferred Stock par value $1.00 per share;
authorized shares - 1,000,000; issued and
outstanding - 2,848 at December 31, 1996 2,848 2,848
Series B Preferred Stock, par value $1.00
per share; authorized shares - 100; issued
and outstanding - 100 at December 31, 1996 100 100
Common stock, par value $0.0001 per share;
authorized shares - 25,000,000; issued and
outstanding - 10,122,323 at March 31, 1997
and December 31, 1996 1,012 1,012
Less: 309,217 shares Common Stock held
in treasury, at cost (331,771) (331,771)
Additional Paid-In Capital 15,107,556 15,107,556
Accumulated Deficit (13,770,302) (13,731,190)
------------ ------------
Net Shareholders' Equity 1,009,443 1,048,555
------------ ------------
Total Liabilities and Stockholders' Equity $ 9,254,725 $ 10,282,954
============ ============
</TABLE>
<PAGE> 5
PRINCETON DENTAL MANAGEMENT CORPORATION
Condensed Consolidated Statements of Operation
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
Revenue: 1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Practice Revenue $ 2,656,539 $3,696,578 $ 5,589,326 $ 7,439,193
Laboratory Revenue 1,100,787 1,013,830 2,161,485 1,988,311
----------- ---------- ----------- -----------
Total Revenue $ 3,757,326 $4,710,408 $ 7,750,811 $ 9,427,504
----------- ---------- ----------- -----------
Expenses:
Practice compensation and Benefits 1,829,361 2,543,628 3,997,879 4,966,673
Other Practice Expense 536,731 971,867 1,088,865 1,932,607
Cost of Laboratory Revenue & Expenses 894,723 1,017,142 1,720,495 1,903,430
General Corporate Expenses 162,119 615,584 405,257 996,212
Depreciation and Amortization 138,043 256,250 363,325 487,251
----------- ---------- ----------- -----------
Total Operating Expenses 3,560,977 5,404,471 7,575,821 10,286,173
----------- ---------- ----------- -----------
Operating Gain/(Loss) 196,349 (694,063) 174,990 (858,669)
Gain from sale of practices & laboratory 246,526 0 213,954 0
Interest Expense (258,411) (158,674) (448,439) (309,486)
Other Income 7,798 12,319 19,926 25,190
----------- ---------- ----------- -----------
Net Income (Loss) $ 192,262 $ (840,418) $ (39,569) $(1,142,965)
=========== ========== ========== ===========
Net Loss Per Share $ 0.02 $ (0.10) $ (0.00) $ (0.14)
=========== ========== ========== ===========
Weighted Average
Number of Shares Outstanding 10,122,323 8,169,870 10,122,323 8,169,870
</TABLE>
<PAGE> 6
PRINCETON DENTAL MANAGEMENT CORPORATION
Condensed Consolidated Statements of Cash
For the Six Month Period Ending June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
Operating Activities:
Net Loss $ (39,569) $(1,142,965)
Cash Provided by (Used In) Operating Activities:
Depreciation and Amortization 363,325 487,251
Gain on sale of Dental Practices (213,954) 1,410
Provision for Bad Debts - 119,000
Stock redemption price in excess of market - 18,229
Issuance of stock under Incentive Stock Bonus Plan - 70,750
Changes in Operating Assets and Liabilities:
Accounts Receivable (132,792) (354,364)
Inventories (27,075) (681)
Other Current Assets 2,093 89,239
Accounts Payable (197,198) 574,497
Accrued Expenses 193,107 354,925
--------- -----------
Net Cash Used In Operating Activities (52,063) 217,291
--------- -----------
Cash Provided by (Used In) Investing Activities:
Debt Issuance Costs - (27,819)
Other Assets 15,613 -
Proceeds from notes receivable 4,404 -
Purchase of property and equipment - Net (41,560) (117,275)
Proceeds from sale of Dental Practices 710,000 -
--------- -----------
Net Cash Provided by Investing Activities 688,457 (145,094)
--------- -----------
Cash Provided by (Used In) Financing Activities:
Proceeds from issuance of long-term debt 0 31,826
Principal payments on capital lease obligations (21,715) (21,081)
Principal payments on notes payable (93,311) (18,835)
Principal payments on long term debt and
notes payable to shareholders (193,765) (154,806)
--------- -----------
Net Cash Used In Financing Activities (308,791) (162,896)
--------- -----------
Increase in Cash and Cash Equivalents 327,603 (90,699)
Cash and Cash Equivalents at beginning of period 185,235 124,872
--------- -----------
Cash and Cash Equivalents at end of period $ 512,838 $ 34,173
========= ===========
</TABLE>
<PAGE> 7
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Consolidated Financial Statements
June 30, 1997
(Unaudited)
Note 1 - SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed by Princeton Dental Management Corporation
(the Company) for quarterly financial reporting purposes are the same as those
disclosed in the Company's annual financial statements. In the opinion of
management, the accompanying condensed consolidated financial statements
reflect all adjustments necessary for a fair presentation of the information
presented.
The quarterly condensed consolidated financial statements herein have been
prepared by the Company without audit. Certain information and footnote
disclosures included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
Although the Company's management believes the disclosures are adequate to make
the information not misleading, it is suggested that these quarterly condensed
financial statements be read in conjunction with the audited annual financial
statements and footnotes thereto.
Note 2 - RECLASSIFICATIONS
The accompanying condensed consolidated financial statements contain certain
reclassifications of previously reported information. The reclassifications
have been made to more appropriately reflect the operating results of the
Company.
Note 3 - FINANCING AGREEMENT
1. On April 22, 1996, the Company entered into a financing arrangement pursuant
to which the Company issued Convertible Debt (the Convertible Debt) to
Amsterdam Equities Limited in the amount of $2,483,620 and 3,599.77 shares of
Series A 11.75% Cumulative Convertible Preferred Stock (the Preferred Stock) to
Amsterdam Equities Limited (195 shares), Frank Leonard Laport (1,904.77
shares), and Beverly Trust Company, as custodian for the Frank Leonard Laport
Rollover Individual Retirement Account No. 75-49990 (1,500 shares)
(collectively, the Investor Group). The Convertible Debt and Preferred Stock
replaced indebtedness of the Company at April 22, 1996, in the amount of
$1,976,700 incurred under that certain letter agreement dated December 7, 1994
(the Letter Agreement) and that certain Secured Revolving Demand Note dated
January 27, 1995 (the Secured Note). Under the terms of the Convertible Debt
and Preferred Stock Agreements (also referred to herein collectively as the
Financing Arrangement) the Investor Group may lend additional funds, in
increments to be determined solely by the Investor Group. The Convertible Debt
and Preferred Stock were initially to bear interest and have a coupon rate,
respectively of 11.75%, plus the payment of any withholding taxes which might
be due and owing with respect to any person which is a foreign entity.
Payments on the Convertible Debt/Preferred Stock were interest only due in
quarterly installments which were to begin in September 1996. The Convertible
Debt/Preferred Stock originally had a maturity of seven years from the date of
closing, subject to acceleration in the event of a default. Subsequent to
September 30, 1996 the Company was unable to pay the interest only requirements
of the Convertible Debt and Preferred Stock Agreements, therefore, effective
October 1, 1996 until the accrued interest is paid, interest began to accrue at
the default rate of 21.75%. The accrued interest on the Convertible
Debt/Preferred Stock totaled approximately $563,112 at June 30, 1997.
Pursuant to that certain Modification Agreement ("Modification Agreement")
entered into between the Investor Group and the Company and dated as of July 1,
1997, the Investor Group has agreed, conditioned upon continued listing by the
Company on the Nasdaq SmallCap Market and similar concessions by another
significant Company creditor, to waive all accumulated and ongoing interest
and/or dividends on the Convertible Debt/Preferred Stock for the period from
January 1, 1997 through December 31, 1997 (see Item 5 and Exhibit 10.55).
<PAGE> 8
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Consolidated Financial Statements
June 30, 1997
(Unaudited)
Assuming this waiver continues through December 31, 1997, this waiver on the
part of the Investor Group will result in a total savings to the Company in
excess of $700,000.
In addition to the amounts owed under the Letter Agreement and the Secured
Note, the terms of the Convertible Debt and Preferred Stock Agreements called
for the conversion of 291,667 shares of the Company's Regulation D stock held
by the Investor Group into $350,000 of Convertible Debt and Preferred Stock.
The shares of common stock redeemed are being held in treasury at June 30,
1997.
An additional provision of the Convertible Debt and Preferred Stock Agreements
included the payment of $300,000 as a closing fee and required the Company to
reimburse the legal fees and costs and expenses of the Investor Group in
connection with the negotiation and the closing of the transaction which
totaled $216,897. The closing fees and reimbursement of the costs and expenses
were payable in the form of Convertible Debt and Preferred Stock. In total, the
Company incurred costs of $544,716 in connection with the refinancing which has
been capitalized and will be amortized over a period of seven years or until
the Convertible Debt/Preferred Stock is called.
The terms of the Convertible Debt and Preferred Stock Agreements provided the
Investor Group with certain rights pertaining to the registration of any common
stock to which the Investor Group may convert from Convertible Debt or
Preferred Stock, certain anti-dilution rights, and a right of first refusal on
any future offering of Company securities.
Under the terms of the transaction, the Company also issued a warrant to
purchase 100 shares of Series B Preferred Stock. The Series B Preferred Stock
entitled Amsterdam Equities Limited, after the occurrence of an event of
default, to elect a Class B director who would have super-majority voting
powers on the Company's Board of Directors.
The Convertible Debt and Preferred Stock may be converted into the common stock
of the Company, at the sole option of the Investor Group, at various conversion
rates as set forth in the conversion formula contained in the Convertible Debt
and Preferred Stock Agreements. Conversion pursuant to such conversion formula
would result in a conversion price per share of the Company's common stock
below present market levels. If the Investor Group were to convert all
outstanding Convertible Debt and Preferred Stock at the present time, the
conversion would result in the issuance to the Investor Group of a majority
interest representing in excess of Fifty Percent (50.0%) of the issued and
outstanding shares of the Company's common stock (assuming full conversion and
anti-dilution).
In addition, pursuant to the terms of the Financing Arrangement, the Company
issued to the holders of the Convertible Debt and the Preferred Stock a series
of default warrants to purchase an aggregate of 4,125,000 shares of common
stock at an exercise price of $0.10 per share. The Investor Group could
exercise the warrants only upon the occurrence of an event of default under the
terms of the Financing Arrangement or upon the failure by the Company to
achieve certain minimum financial goals of net income of at least one dollar in
the fiscal year ending December 31, 1996, and net income at least equal to 60%
of the dollar amount of Convertible Debt of the Company outstanding at the end
of 1997 for the fiscal year ending December 31, 1997, increased by 10% each
year thereafter, compounded, plus 60% of the additional Convertible debt
outstanding at the end of such year over the immediately preceding year. The
Company has been in ongoing default under the Financing Arrangement and the
stated financial goals have not been met, and, accordingly, these default
warrants have been capable of being exercised by the Investor Group upon
payment of the exercise price of $412,500 in the aggregate since January 1,
1997. The cumulative effect of the issuance of shares pursuant to the default
warrants to the Investor Group and the conversion of the outstanding
Convertible Debt/Preferred Stock could result in ownership by the Investor
Group of up to 75% of the Company's total issued and outstanding common stock.
To date, the Investor Group has taken no steps to exercise these default
warrants.
Pursuant to the Modification Agreement, and as an absolute pre-condition to the
waiver by the Investor Group of all accumulated and ongoing interest and/or
dividends on the Convertible Debt/Preferred Stock
<PAGE> 9
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Consolidated Financial Statements
June 30, 1997
(Unaudited)
for the period from January 1, 1997 through December 31, 1997 (see Item 5 and
Exhibit 10.55), the Company agreed to reduce the exercise price of the default
warrants from $0.10 per share to $0.01 per share effective as of July 1, 1997.
This modification effectively reduces the aggregate exercise price of $412,000
for the default warrants to an aggregate exercise price of $41,200 (not
accounting for any adjustments due to changes in the total issued and
outstanding shares of the Company's common stock).
2. In August 1996, the Company entered into a Letter Agreement by and among the
Company; Dr. Charles R. Mitchell, a former President of the Company; Stratum
Management, Inc., a former consultant to the Company; John H. Hagan, a former
director of the Company; Dr. Seymour Kessler, a former director of the Company;
and Amsterdam Equities Limited, Frank Leonard Laport, and Beverly Trust
Company, as Custodian of the Frank Leonard Laport Rollover Individual
Retirement Account No. 75-49990, each members of the Investor Group. Under the
Letter Agreement, which became effective on August 9, 1996, the Series B
Preferred Stock previously referred to in the Convertible Debt Agreement
executed by the Company on April 22, 1996 was amended to be immediately
effective and Class B Preferred Stock was immediately issued to Amsterdam.
The Class B Preferred Stock entitled Amsterdam to elect a Director to the Board
of Directors of the Company who would have super majority voting powers. In
effect, the Class B director appointed by Amsterdam shall have the number of
votes on the Board of Directors as the current Board currently holds, plus one
vote. The amendment and activation of the Class B Preferred Stock occurred
upon the satisfaction of the following two conditions: (i) delivery to the
Company of a notice, pursuant to which the Investor Group would convert an
aggregate amount of U.S. $700,000 of currently outstanding Convertible
Debt/Preferred Stock into the Company's Common Stock in accordance with the
contractual terms of the Convertible Debt and Preferred Stock Agreements
executed on April 22, 1996 and (ii) upon the advance to the Company of an
additional $200,000.00 pursuant to the Convertible Debt and the Preferred Stock
Agreements executed April 22, 1996. As of August 9, 1996, the Investor Group
had satisfied these two conditions and the Class B Preferred Stock was issued
to Amsterdam. Frank Leonard Laport, Chairman and CEO of the Company, was
elected as the Series B Director effective as of August 9, 1996. The Series B
Director has not voted on any matters to date or taken any action whatsoever
to date.
In connection with the activation of the Class B Preferred Stock, the provision
of additional funding and conversion of debt, Stratum, Hagan and Kessler agreed
to forfeit, on a pro rata basis, an aggregate amount of 300,000
options/warrants to purchase the Company's Common Stock of the Company.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached
condensed consolidated financial statements and notes thereto, and with the
Company's audited financial statements and notes thereto for the year ended
December 31, 1996.
Results of Operations
Revenue for the six month period ended June 30, 1997 was $7,750,811 compared
with $9,427,504 for the six month period ended June 30, 1996, a decrease of
$1,676,693. The change in revenue is due primarily to the sale of three dental
practices and one dental laboratory. Operating expenses decreased $2,710,352
to $7,575,821 for the six month period ended June 30, 1997 from $10,286,173 for
the six month period ended June 30, 1996. This decrease is due in large part
to the sales of the practices and dental laboratory, as well as several cost
cutting measures related to compensation, benefits, and various other practice
expenses.
<PAGE> 10
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Consolidated Financial Statements
June 30, 1997
(Unaudited)
Interest expense increased $138,953 to $448,439 for the six month period ended
June 30, 1997 versus $309,486 incurred in the comparable three month period
last year. The increase is primarily the result of interest accruing on the
Convertible Debt and Preferred Stock Agreements at the default rate. As
indicated in Item 5, it is anticipated that the Modification Agreement and the
Allonge (see Exhibits 10.55 and 10.56) will have an ongoing material positive
effect upon the Company's interest expense.
The net loss decreased by $1,103,396 from $1,142,965 for the six month period
ended June 30, 1996, to $39,569 for the six month period ended June 30, 1997.
The net loss for the six month period ended June 30,1997 of $39,569 shows
substantial improvement over the prior year six month period ended June 30,
1996, primarily as a result of significant improvement in operations, the gain
from the sale of Century Dental Center, Mason Dental Southeast / Renaissance
Dental Studio, a reduction of the depreciation based on the sales of three
dental practices, and a dental laboratory, and a reduction of the monthly
amortization based on the write down of goodwill at December 31, 1996. Losses
from operations are attributable to an increase in the overall cost of
providing dental services and expanding the patient base to include more
specialty services as well as the production cost within the laboratory
division.
Financial Condition
Changes in the Company's financial condition at June 30, 1997 as compared with
December 31, 1996 resulted primarily from a general improvement in operations
and the sale of three dental practices and a dental laboratory during the six
month period ended June 30, 1997. During the six months ended June 30, 1997,
the Company realized significant proceeds from the sale of Fairfield Dental,
Center Century Dental Center, and Mason Dental Southeast / Renaissance
Dental Studio. The sale of the Dental Team of Delray Beach was exclusively
forgiveness of debt. The Company recognized no cash from the sale of the
Delray Beach practice.
During the first and second quarters of 1997, the Company arranged payment
terms with several of its suppliers. Those suppliers have once again begun
extending standard credit terms, and orders are no longer shipped on a C.O.D.
basis. One of the Company's largest suppliers has begun shipping supplies and
providing services based on a mutually agreed upon plan that has been put into
place to reduce the outstanding balances.
The Company is currently in the process of developing revenue enhancement
programs in both the dental practice segment as well as the laboratory segment.
In addition, the Company is also working to improve the operating results of
the various operations by reducing the costs of patient services including the
reduction in payroll. The Company has begun steps to reduce general and
administrative expenses. However, the Company can make no assurances in regards
to the results of these programs.
In addition, the Company has sold its dental practices in Pennsylvania and its
dental laboratory in Florida. These sales are consistent with the Company's
long-term business plans and should generally have a positive impact upon
operations. No additional sales have been contemplated at this time.
During the first and second quarters of 1996, the Company did not deposit
certain state payroll tax liabilities totaling approximately $53,000. The
Company filed the state payroll tax returns for the first and second quarters
of 1996 during the first quarter of 1997. Management is currently negotiating
with the State to abate penalties associated with the late payment. These
negotiations are under review by state authorities.
In addition, during 1994 the Company did not make certain federal payroll tax
deposits on a timely basis. The payroll deposits and all outstanding payroll
tax returns have been filed as of January, 1997.
<PAGE> 11
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Consolidated Financial Statements
June 30, 1997
(Unaudited)
Management has provided a reserve of approximately $60,000 for the state tax
penalties and $70,000 to cover any IRS penalties. Management believes these
reserves are sufficient to cover these obligations.
Liquidity and Capital Resources
As of June 30, 1997, the Company had a working capital deficit of $4,008,335
and a financial accumulated deficit of $13,770,302. Goodwill and other
intangibles comprise approximately 62% of total assets, leaving tangible assets
of approximately $3,531,452 and negative tangible net worth of approximately
$4,713,830.
During the six month period ended June 30, 1997, the Company's cash and cash
equivalents increased $327,603. Cash used in operations was $52,063, resulting
primarily from the Company's decrease in accounts receivable, which can be
attributed to the sale of the dental practices, accounts payable, and accrued
expenses. These operations were partially offset by depreciation and
amortization of $363,325.
Investing activities provided $688,457 of cash, primarily related to the sale
of the dental practices and laboratory. Cash of $308,791 was used in financing
activities, primarily as a result of the extinguishment of debt and principal
payments on capital lease obligations and notes payable in the amount of
$21,715.
As disclosed in Note 3, the Company's primary source of outside financing is
from the Investor Group. Given the Company's working capital deficit and
negative tangible net worth, the Company is heavily reliant on the Investor
Group's financing to continue the Company's expansion plans and to a larger
extent, provide working capital to fund the operations. As indicated in Item
5, the Company has reached agreement with the Investor Group as to a temporary
waiver of interest.
<PAGE> 12
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Consolidated Financial Statements
June 30, 1997
(Unaudited)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
a) On October 16, 1996, the Company was sued for $160,000 by
Romajo Partners Limited Partnership, a Partnership controlled by Dr.
Seymour Kessler, a former director of the Company. The Company
intends to vigorously contest the suit and, in connection with this
litigation, has brought various counterclaims against Dr. Kessler
and has joined certain other individuals as parties to such
litigation, including Dr. Charles Mitchell, a former officer and
director of the Company.
b) The Company is involved in a number of other legal
proceedings related to malpractice, worker's compensation, general
employment and contract disputes all in various stages of
proceedings, most of which will be covered by insurance.
Item 5. Other Information
1. Effective as of August 4, 1997, the Board of Directors
approved an extension of the expiration date of those warrants
issued pursuant to that certain Warrant Agreement dated April 15,
1992 between Princeton Dental Management Corporation and Continental
Stock Transfer & Trust Company for a period of twelve (12) months,
from October 13, 1997 through October 12, 1998.
2. Effective as of July 1, 1997, the Company entered into that
certain Modification Agreement with the Investor Group. Pursuant to
the Modification Agreement, the Investor Group agreed, conditioned
upon continued listing by the Company on the Nasdaq SmallCap Market
and similar concessions by another significant Company creditor, to
waive all accumulated and ongoing interest and/or dividends on the
Convertible Debt/Preferred Stock for the period from January 1, 1997
through December 31, 1997 (see Exhibit 10.55). Assuming this
waiver continues through December 31, 1997, this waiver on the part
of the Investor Group will result in a total savings to the Company
of in excess of $700,000. Pursuant to the Modification Agreement,
and as an absolute pre-condition to the waiver by the Investor Group
of all accumulated and ongoing interest and/or dividends on the
Convertible Debt/Preferred Stock for the period from January 1, 1997
through December 31, 1997 (see Exhibit 10.55), the Company agreed to
reduce the exercise price of the default warrants from $0.10 per
share to $0.01 per share effective as of July 1, 1997. This
Modification effectively reduces the exercise price for the default
warrants from an aggregate exercise price of $412,000 to an
aggregate exercise price of $41,200 (not accounting for any
adjustments due to changes in the total issued and outstanding
shares of the Company's common stock).
3. Effective as of July 1, 1997, the Company, Mason Dental Midwest,
Inc. and the constituent shareholders ("Constituent Shareholders")
of the Delaware corporation formally known as Mason Dental, Inc.
entered into that certain Allonge and Fourth Amendment to
Acquisition Promissory Note ("Allonge"). Pursuant to the Allonge,
the Constituent Shareholders agreed, conditioned upon continued
listing by the Company on the Nasdaq SmallCap Market and similar
concessions by the Investor Group (see Exhibit 10.55 and 10.56), to
waive all ongoing interest that might be due pursuant to the
Acquisition Promissory Note (as such term is defined in the
Allonge) for the period from July 1, 1997 through June 30, 1998
(see Exhibit 10.56). Assuming this waiver continues
<PAGE> 13
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Consolidated Financial Statements
June 30, 1997
(Unaudited)
through June 30, 1998, this waiver on the part of the Constituent
Shareholders will result in a total savings to the Company of in
excess of $120,000.
4. Previously, the Board of Directors of the Company had
announced that, effective as of June 1, 1997, the Company had sold
the assets comprising the Mason Dental Southeast, Inc. / Renaissance
Dental Studio to Mr. Lawrence Ceraulo, individually and doing
business as Certex Dental Studio. The Mason Dental Southeast, Inc.
/ Renaissance Dental Studio, with 1996 revenues of approximately
$390,000, represented approximately 2.2% of the total revenue of the
Company, and has represented a loss in 1996 to the company. The
Mason Dental Southeast, Inc. / Renaissance Dental Studio was sold
for $92,096 in the form of a short-term note; an additional
short-term note payable to purchase supplies in the amount of
$9,847; and an assumption of an existing note payable of $18,372.
The sale of Mason Dental Southeast, Inc. / Renaissance Dental Studio
was a profitable transaction for the Company, in the amount of
approximately $49,000.
Pursuant to the terms of the Company's agreement with Mr. Lawrence
Ceraulo, individually and d/b/a Certex Dental Studio, Mr. Ceraulo
was required to make payment in full of all amounts due and owing
under the acquisition notes as of July 15, 1997. Mr. Ceraulo has
made payments of approximately $9,200, but approximately $100,000
remains due and owing from Mr. Ceraulo. The Company has agreed to
extend the term of the acquisition notes through July, 1998, on
terms advantageous to the Company (see Exhibit 10.57).
5. On November 6, 1996, NASDAQ approved, subject to public
comment, certain modifications to the listing criteria on the NASDAQ
System. These proposed modifications were extensive, and included a
proposal that a company whose minimum bid price fell below $1.00 for
a period of time could, in certain circumstances, be delisted. These
proposed modifications are currently in the process of examination
by the Securities and Exchange Commission for final approval. The
Company's minimum bid price is currently below $1.00, and the
Company can make absolutely no assurances regarding the final
outcome of these proposed modifications to the listing criteria on
the NASDAQ System or the impact which such modifications could have
on the Company's continued listing on the NASDAQ System. The
Company has been advised that it is presently not in compliance with
NASDAQ listing requirements, and, absent changes in Company
operations, may, under certain circumstances, be delisted from the
Nasdaq SmallCap Market.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
The following documents are filed as an exhibit to this Report:
(10.51) Letter Agreement dated February 4, 1997 between Dr. Richard
Staller and the Registrant regarding the sale of the assets of the
Dental Team of Delray Beach. (Incorporated by reference to Exhibit
10.51 to the Registrant's Form 10-KSB for the fiscal year ended
December 31, 1996 filed with the Commission on March 31, 1997)
(10.52) Letter Agreement effective as of January 10, 1997 by and
among the Registrant and Drs. Barfield and Payne regarding the sale
of the assets of the Fairfield Dental
<PAGE> 14
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Consolidated Financial Statements
June 30, 1997
(Unaudited)
Center practice. (Incorporated by reference to Exhibit 10.51 to the
Registrant's Form 10-KSB for the fiscal year ended December 31,
1996 filed with the Commission on March 31, 1997)
(10.53) Agreement effective as of May 20, 1997 by and among the
Registrant and Valley Forge Dental Associates regarding the sale of
the assets of the Century Dental Center practice.
(10.54) Letter Agreement effective as of June 1, 1997 by and among
the Registrant and Mr. Larry Ceraulo d/b/a Certex Dental Studio
regarding the sale of the assets comprising Mason Dental Southeast,
Inc. and Renaissance Dental Studio.
(10.55) Modification Agreement dated as of July 1, 1997 by and
among the Registrant, Amsterdam Equities Limited, Frank Leonard
Laport, and Beverly Trust Company, as Custodian of the Frank
Leonard Laport Rollover Individual Retirement Account No. 75-49990.
(10.56) Allonge and Fourth Amendment to Acquisition Promissory Note
dated as of July 1, 1997, the Company, Mason Dental Midwest, Inc.
and the Constituent Shareholders of the Delaware corporation
formally known as Mason Dental, Inc.
(10.57) Promissory Note in the initial principal amount of $96,357
executed by Lawrence Ceraulo, Victor Texidor, and Certex Dental
Studio, Inc. in favor of Mason Dental Southeast and dated as of
August 1, 1997.
b. Reports on Form 8-K
The Registrant filed the following Form 8-Ks during the period from
January 1, 1997 through June 30, 1997:
1) On January 16, 1997 the Registrant filed with
the Securities and Exchange Commission a current report on
Form 8-K regarding the sale of the assets of the Fairfield
Dental Center practice to Drs. Barfield and Payne. The
Fairfield practice, with 1995 revenues of approximately
$2,000,000, represented approximately 11.9% of the total
revenue of the Company. The Fairfield practice was sold for a
purchase price of approximately $885,000, of which
approximately $410,000 represented forgiveness of debt.
2) On February 11, 1997, the Registrant filed with
the Securities and Exchange Commission a current report on
Form 8-K regarding the sale of the assets of the Dental Team
of Delray Beach practice to Dr. Richard Staller. The Delray
Beach practice, with 1995 revenues of approximately $859,135,
represented approximately 5.1% of the total revenue of the
Company. The Delray Beach practice was sold for a purchase
price of approximately $200,000 in the form of forgiveness of
debt.
3) On May 23, 1997, the Registrant filed with the
Securities and Exchange Commission a current report on Form
8-K regarding the sale of the assets comprising the Century
Dental Center to Valley Forge Dental Associates, P.C. The
Century Dental practice, with 1996 revenues of approximately
$965,000, represented approximately 5.3% of the total revenue
of PDMC. The Century practice was sold for $585,000. The
sales
<PAGE> 15
PRINCETON DENTAL MANAGEMENT CORPORATION
Notes to the Consolidated Financial Statements
June 30, 1997
(Unaudited)
price includes $235,000 in cash, $140,000 in contingency
payments, a $30,000 note receivable, and forgiveness of debt of
approximately $180,000.
4) On June 6, 1997, the Registrant filed with the Securities and
Exchange Commission a current report on Form 8-K regarding the
sale of the assets comprising the Mason Dental Southeast, Inc. /
Renaissance Dental Studio to Mr. Lawrence Ceraulo, individually
and doing business as Certex Dental Studio. The Mason Dental
Southeast, Inc. / Renaissance Dental Studio, with 1996 revenues of
approximately $390,000, represented approximately 2.2% of the
total revenue of PDMC, and has represented a loss in 1996 to the
company. The Mason Dental Southeast, Inc. / Renaissance Dental
Studio was sold for $92,096 in the form of a short-term note; an
additional short-term note payable to purchase supplies in the
amount of $9,847; and an assumption of an existing note payable of
$18,372. The sale of Mason Dental Southeast, Inc. / Renaissance
Dental Studio was a profitable transaction for PDMC, in the amount
of approximately $49,000.
<PAGE> 16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this quarterly report of Form 10-QSB for the quarter
ended June 30, 1997, to be signed on its behalf, by the undersigned there unto
duly authorized.
DATED: Princeton Dental Management Corporation
By: /s/ Gary A. Lockwood
-----------------------------------
Gary A. Lockwood
President and Chief Operating Officer
<PAGE> 1
EXHIBIT 10.53
AGREEMENT OF PURCHASE AND SALE
By and Between
PRINCETON MEDICAL MANAGEMENT NORTHEAST, INC.
and
VALLEY FORGE DENTAL ASSOCIATES, INC.
<PAGE> 2
TABLE OF CONTENTS
SECTION PAGE
------- ----
Recitals ................................... 1
I Purchase and Sale of the Assets ............ 1
II Representations, Warranties, Covenants
and Agreements of the Seller ............... 5
III Representations, Warranties, Covenants
and Agreements of the Purchaser ............ 19
IV Additional Covenants of the Seller and
the Purchaser ............................ 20
V Closing .................................... 23
VI Conditions to the Seller's Obligation to
Close .................................... 23
VII Conditions to the Purchaser's
Obligation to Close ........................ 25
VIII Indemnification ............................ 27
IX Brokers and Finders ........................ 30
X Transfer of Name ........................... 30
XI Miscellaneous .............................. 30
Signatures ................................. 34
SCHEDULES
I. EXCLUDED ASSETS
II. ASSUMED LIABILITIES
III. CONTINGENT PAYMENTS
IV. ALLOCATION OF PURCHASE PRICE
EXHIBITS
A. FORM OF PROMISSORY NOTE
B. CERTAIN CONSENTS, LINES, CONTRACTS, PERMITS AND OTHER MATTERS
C. FINANCIAL STATEMENTS
D. CERTAIN EMPLOYEES OF THE BUSINESS
E. EMPLOYEE BENEFIT PLANS
F. INTELLECTUAL PROPERTY RIGHTS
G. BANK ACCOUNTS
H-1. FORM OF EMPLOYMENT AGREEMENT - JONATHAN NASH,
D.D.S.
H-2. FORM OF MODIFICATION AGREEMENT
I. FORM OF ASSIGNMENT OF LEASE
<PAGE> 3
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT made as of the 1st day of May, 1997 by and between
Princeton Medical Management Northeast, Inc., a Florida corporation (the
"Seller"), and Valley Forge Dental Associates, Inc., a Delaware corporation
(the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Seller, together with Century Dental Center, P.C., a
Pennsylvania professional corporation ("Century Dental"), is engaged in the
business of operating and managing a dental practice under the name "Century
Dental Center" which provides dental services and related activities at one (1)
facility in the city of Springfield in the Commonwealth of Pennsylvania (such
activities being hereinafter referred to as the "Business"); and
WHEREAS, the Purchaser (or its designee) desires to acquire
from the Seller certain assets of the Seller described in Section I(C)(i)
hereof (the "Assets") and to assume certain liabilities and contractual
obligations of the Seller as described in Section I(C)(ii) hereof (the "Assumed
Liabilities"), and the Seller desires to sell or assign the Assets and to
assign the Assumed Liabilities to the Purchaser (or its designee), on the terms
and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, and intending to be legally
bound, the parties hereto hereby agree as follows:
SECTION I
PURCHASE AND SALE OF THE ASSETS
A. Purchase and Sale of the Assets. Subject to the terms and
conditions of this Agreement and on the basis of the representations,
warranties, covenants and agreements herein contained, at the Closing
(as hereinafter defined):
(i) The Seller agrees to sell, assign and convey to
the Purchaser (or its designee), and the Purchaser (or its designee)
agrees to purchase, acquire and accept from the Seller, the Assets.
(ii) The Seller agrees to assign to the Purchaser (or
its designee) and the Purchaser (or its designee) agrees to accept and
assume from the Seller, the Assumed Liabilities. The Purchaser (and
its designee) shall not assume and shall have no responsibility with
respect to, and shall be indemnified by the Seller against any and all
liabilities or obligations of the Seller, other than the Assumed
Liabilities.
<PAGE> 4
B. Purchase Price. The purchase price (the "Purchase Price")
for the Assets is (i) $355,109.38 and (ii) the contingent payments, if
earned (the "Contingent Payments"), provided for in Section I(D)
hereof. The Purchase Price payable at the Closing shall be made by (a)
delivery to the Seller of $234,585.87 in immediately available funds by
means of a wire transfer to an account designated by the Seller, (b) at
the direction of the Seller, delivery to First Republic Bank ("First
Republic") of $61,655.25 in immediately available funds by means of a
wire transfer to an account designated by First Republic, (c) at the
direction of the Seller, delivery to Jonathan D. Nash, D.D.S., P.C.
f/k/a Century Dental Center I, P.C. ("Century") of $29,434.13 in
immediately available funds by means of a wire transfer to an account
designated by Century and (d) delivery of an 8% promissory note of the
Purchaser in the principal amount of $29,434.13 in the form of Exhibit
A attached hereto.
C. Assets; Assumed Liabilities.
(i) The Assets shall consist of all assets, business,
contract rights, patient records, financial books and financial
records, other books and records and good will, of every kind
and nature, real, personal, and mixed, tangible and intangible,
wherever located, of the Seller used in or in any way related to the
Business as conducted by the Seller, including, but not limited to,
inventory and supplies, prepaid expenses, deposits, tradenames,
trademarks, patents, copyrights, inventions, books and records, patient
files, and all other agreements and arrangements necessary for the
uninterrupted and continuing operation of the Business, except for the
assets listed in Schedule I hereto (the "Excluded Assets").
(ii) The Assumed Liabilities shall consist of and shall
be limited solely to the obligations and liabilities of the Seller
incurred in connection with the Business listed in Schedule II hereto.
The Purchaser (and its designee) shall not assume, shall have no
responsibility with respect to, and shall be indemnified, by the
Seller against any liabilities or obligations of the Seller or the
Business, except for the Assumed Liabilities set forth in Schedule II
hereto. The Seller shall remain liable for, and shall pay when due,
any and all obligations and liabilities of the Seller and the Business
other than the Assumed Liabilities.
(iii) It is specifically understood and agreed that
the Assumed Liabilities shall not include (a) liabilities of the Seller
or the Business for expenses incurred or accrued, at any time, in
connection with the transactions contemplated by this Agreement
or in any other connection not in the ordinary course of business, (b)
liabilities of the Seller or the Business for federal, state and
municipal income, sales, franchise and other taxes, including any
interest, penalties and assessments thereon, and (c) liabilities of the
Seller or the Business arising out of or relating to any governmental
or private payor claims, returns, invoices, cost reports, late filings
or billing practices which relate to any period prior to the date of
Closing. Neither the Purchaser nor any designee of the Purchaser
assuming the Assumed Liabilities shall assume any liabilities of the
Seller or the Business in connection with any understanding or
agreement, whether written or oral, with respect to any retirement
plan, including, but not limited to, any profit sharing, 401(k) or
defined benefit plan (as defined in Section 414(j) of the Internal
Revenue Code of 1986, as amended (the "Code").
<PAGE> 5
D. Contingent Payments. Each of the Seller and the Purchaser
acknowledges and agrees that since the Business has a short operating
history, the full value of the Business on the date of the
Closing is difficult to ascertain with any degree of certainty on the
date of Closing. Accordingly, the parties to this Agreement agree that
it is appropriate to provide for the Contingent Payments set forth in
this Section I(D) to reflect more accurately the full value of the
Business on the date of Closing. Subject to the conditions set forth
herein and in Schedule III hereto, within thirty (30) days after May
31, 1997 and, May 31, 1998, the Purchaser shall deliver to the Seller,
the Contingent Payments, if any, payable with respect to the
twelve-month periods ending May 31, 1997 and May 31, 1998,
respectively. The amount of the Contingent Payments payable to the
Seller with respect to each such twelve-month period (each, a
"Contingent Period") (i) shall be based upon the achievement by the
Contingent Payment Business (as hereinafter defined) of targeted "net
operating revenues" (as hereinafter defined) during such Contingent
Period and (ii) shall be determined in accordance with the provisions
hereof and Schedule III hereto. Each of the Contingent Payments, if
earned, shall be made by delivery to the Seller of bank checks payable
to the order of the Seller in such amounts of cash as is determined in
accordance with Schedule III hereto.
E. Computation of Net Operating Revenues. The Purchaser shall,
within thirty (30) days after the end of each Contingent Period,
compute the amount of the net operating revenues of the Contingent
Payment Business for such Contingent Period. The amount so
computed shall be the net operating revenues for purposes of
determining whether or not Contingent Payments shall be due and
payable. Notwithstanding the determination of net operating revenues
for any applicable period by the Purchaser, the Seller shall receive
the information upon which such determination was made, and shall, in
the event of a dispute as to the amount or method of calculation of
such net operating revenues have the right to review all work papers
relating to the determination of net operating revenues. For purposes
of this Agreement, (i) "net operating revenues" of the Contingent
Payment Business shall mean gross charges billed for all services
provided by the Contingent Payment Business, including capitation
revenues pursuant to prepaid dental plans (or, in the event that all or
substantially all of the assets and business of the Contingent Payment
Business, shall have been transferred to another entity or entities,
the allocable portion of the gross charges of such other entity or
entities attributable to the Contingent Payment Business) during the
applicable Contingent Period less any necessary adjustments to reflect
patient refunds and amounts which are determined to be uncollectible at
the time of billing (contractual allowances) or in the future (billing
errors) as determined in accordance with generally accepted accounting
principles consistent with the Purchaser's accounting practices.
For purposes of Sections I(D) and I(E) hereof and Schedule III
hereto, the term "Contingent Payment Business" shall mean the
operations, services and activities of the Business as operated by
the Purchaser (or its designee) combined with the operations of any
related professional corporation managed by the Purchaser (or its
designee) as such operations relate to the Business.
F. Allocation. The Purchase Price (including the Assumed
Liabilities) shall be allocated as set forth in Schedule IV hereto.
The parties hereto agree that the allocation of the Purchase Price
is intended to comply with the allocation
<PAGE> 6
method required by Section 1060 of the Code. The parties shall
cooperate to comply with all substantive and procedural requirements of
Section 1060 of the Code and any regulations thereunder, and the
allocation shall be adjusted if, and to the extent, necessary to comply
with the requirements of Section 1060 of the Code. Neither the
Purchaser nor the Seller will take or permit any affiliated
person to take, for federal, state or local income tax purposes, any
position inconsistent with the allocation set forth in Schedule IV
hereto, or, if applicable, such adjusted allocation. Each of the
Purchaser and the Seller agrees that each of them shall attach to its
tax returns for the tax year in which the Closing shall occur an
information statement on Form 8594, which shall be completed in
accordance with allocations set forth in Schedule IV hereto.
G. Assignment. The parties hereto agree that the Purchaser may
designate one or more direct or indirect wholly owned subsidiaries of
the Purchaser to acquire the Assets and to assume the Assumed
Liabilities; provided, however, that the Purchaser's payment
obligations hereunder shall not be affected by any such designations by
the Purchaser.
SECTION II
REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS OF THE SELLER
The Seller hereby represents and warrants to, and covenants and
agrees with, the Purchaser, as of the date hereof and as of the date of
the Closing, that:
A. Organization and Qualification. The Seller is duly
organized, validly existing and in good standing under the laws of the
State of Florida, is duly qualified to do business in the
Commonwealth of Pennsylvania, and has full corporate power and
authority to own its properties and to conduct the Business. The
Seller has full power, authority and legal right and all necessary
approvals, permits, licenses and authorizations to own its properties
and to conduct the Business and to enter into and consummate the
transactions contemplated under this Agreement, except for such
approvals, permits, licenses and authorizations, the absence of which
would not have a material adverse effect on the business, financial
condition, operations or prospects of the Business taken as a whole (a
"Material Adverse Effect"). The copies of the certificate of
incorporation and by-laws of the Seller which have been delivered to
the Purchaser are complete and correct.
B. Authority. The execution and delivery of this Agreement by
the Seller, the performance by the Seller of its covenants and
agreements hereunder and the consummation by the Seller of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action. This Agreement constitutes a valid and
legally binding obligation of the Seller, enforceable against the
Seller in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally or by general principles of
equity.
C. No Legal Bar; Conflicts. Neither the execution and delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby,
<PAGE> 7
violates any provision of the certificate of incorporation or by-laws
of the Seller or any statute, ordinance, regulation, order, judgment or
decree of any court or governmental agency or board, or conflicts with
or will result in any breach of any of the terms of or constitute a
default under or result in the termination of or the creation of any
lien pursuant to the terms of any contract or agreement to which the
Seller is a party or by which the Seller or any of the Assets is bound,
except where such violation, conflict, breach, default, termination, or
lien creation would not have a Material Adverse Effect. No consents,
approvals or authorizations of, or filings with, any governmental
authority or any other person or entity are required in connection with
the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby and the operation of the Business by
the Purchaser (or its designee) subsequent to the Closing, except for
required consents, if any, to assignment of contracts, leases and other
agreements as set forth in Exhibit B.
D. Financial Statements; No Undisclosed Liabilities. The
Seller has delivered to the Purchaser the balance sheets of the
Business as of December 31, 1995 and December 31, 1994, and the income
statements for the six-month period ended March 31, 1997, the
nine-month period ended September 30, 1996, and the twelve-month period
ended December 31, 1995 and December 31, 1994, which financial
statements (collectively, the "Financial Statements") were internally
prepared. The Financial Statements are true and correct in all
material respects and have been prepared in accordance with generally
accepted accounting principles applied consistently throughout the
periods involved. The Financial Statements fully and fairly present the
financial condition of the Business as at the dates thereof and the
results of the operations of the Business for the periods indicated.
Except to the extent set forth in or provided for in the Financial
Statements or as identified in Exhibit B, and except for current
liabilities incurred in the ordinary course of business consistent with
past practices (and not materially different in type or amount), the
Seller, with respect to the Business, has no liabilities or obligations
of any nature, whether accrued, absolute, contingent or otherwise,
whether due or to become due, whether properly reflected under
generally accepted accounting principles as a liability or a charge or
reserve against an asset or equity account, and whether the amount
thereof is readily ascertainable or not. The Seller is not aware of
any material omissions in the Financial Statements. A true and correct
copy of the Financial Statements is attached hereto as Exhibit C.
E. Absence of Certain Changes. Except as set forth in Exhibit
B, subsequent to March 31, 1997, there has not been any (i) adverse or
prospective adverse change in the condition of the Business, financial
or otherwise, or in the results of the operations of the Seller, in
connection with the Business which has or could reasonably be expected
to result in a Material Adverse Effect; (ii) damage or destruction
(whether or not insured) affecting the properties or business
operations of the Seller, in connection with the Business, or the
Assets; (iii) labor dispute or, to the best of the knowledge of the
Seller, threatened labor dispute involving any of the employees of the
Business, or any resignations, or to the best of the knowledge of the
Seller, threatened resignations of dentists, orthodontists, or other
professional employees, or notice that dentists, orthodontists, or
other professional employees intend to take leaves of absence, with or
without pay; (iv) actual or, to the best of the knowledge of the
Seller, threatened disputes pertaining to the Business with any
major accounts or referral sources of the Business, or actual or, to
the best of the knowledge
<PAGE> 8
of the Seller, threatened loss of business from any of the major
accounts or referral sources of the Business, except where such
disputes or losses would not have a Material Adverse Effect; (v)
changes in the methods or procedures for billing or collection of
customer accounts or recording of customer accounts receivable or
reserves for doubtful accounts with respect to the Business; or (vi)
other event or condition, known to the Seller or which in the exercise
of reasonable diligence should be known to the Seller, not disclosed in
this Agreement pertaining to and adversely affecting the Assets or the
Business.
F. No Dividends, Loans, Etc. Except as set forth in Exhibit B,
subsequent to March 31, 1997, the Seller has not, except in the normal
course of business, paid or discharged any outstanding indebtedness.
Subsequent to March 31, 1997, the Seller, in connection with the
Business, has paid all normal and recurring installments (i) of bank
indebtedness, (ii) under leases and contractual obligations and (iii)
of other amounts due and payable to any persons. Subsequent to March
31, 1997, the Seller has not, in the conduct of the Business, incurred
any bank indebtedness, entered into any leases, loan agreements or
contracts, obligations or arrangements for the payment of money or
property to any person, or permitted any liens or encumbrances to
attach to any of its assets.
G. Real Property Owned or Leased. A list and brief description
of all real property owned by or leased to or by the Seller in
connection with the Business or in which the Sellers in the conduct of
the Business, has any interest is set forth in Exhibit B. All such
leased real property is held subject to written leases or other
agreements (a description of which, including the expiration date of
all leases, is set forth in Exhibit B) which are valid and effective in
accordance with their respective terms, and there are no existing
defaults or events of default, or events which with notice or lapse of
time or both would constitute defaults, thereunder on the part of the
Seller in the conduct of the Business, except for such defaults, if
any, which would not have a Material Adverse Effect. The Seller has no
knowledge of any default or claimed or purported or alleged default or
state of facts which with notice or lapse of time or both would
constitute a default on the part of any other party in the performance
of any obligation to be performed or paid by such other party under any
lease referred to in Exhibit B, except where the failure to have good
and valid title would not have a Material Adverse Effect. The Seller
has not received any written or oral notice to the effect that any
lease will not be renewed at the termination of the term thereof or
that any such lease will be renewed only at a substantially higher
rent.
<PAGE> 9
H. Title to Assets; Condition of Property. The Seller has good
and valid title to the Assets owned by it (in the case of owned real
property and the improvements thereon, good and marketable title in fee
simple) including, without limitation, the properties and assets
reflected in the Financial Statements (except for assets leased under
leases set forth in Exhibit B, inventory and other assets sold or
retired and accounts receivable collected upon, since March 31, 1997 in
the ordinary course of business consistent with past practices), free
and clear of all liens, charges, encumbrances, security interests or
claims whatsoever, except as set forth in Exhibit B. The Seller has
the right, power and authority to sell and transfer the Assets owned by
it to the Purchaser (or its designee), and upon such transfer the
Purchaser (or its designee) will acquire good and marketable title to
the Assets, free and clear of all liens, charges, encumbrances,
security interests or claims whatsoever, except as set forth in Exhibit
B. The properties and assets of the Seller include all properties and
assets used in the operations of the Business as currently conducted.
All such properties and assets of the Seller are in good condition and
repair, consistent with their respective ages, and have been maintained
and serviced in accordance with the normal practices of the Seller.
None of such properties or assets is subject to any liens, charges,
encumbrances or security interests, except as set forth in Exhibit B.
None of such properties or assets (including the Assets) (or uses to
which they are put) fails to conform with any applicable agreement,
law, ordinance or regulation in a manner which could reasonably be
expected to have a Material Adverse Effect or is likely to be material
to the operation of the Business.
I. Taxes. The Seller has filed or caused to be filed on a
timely basis, all federal, state, local, foreign and other tax returns,
reports and declarations (collectively, "Tax Returns") required to be
filed by the Seller in connection with the Business except for those
Tax Returns required to be filed for the taxable year ending December
31, 1996 for which the Seller has timely filed an extension request.
All Tax Returns filed by the Seller on behalf of the Business are true,
complete and correct in all material respects. The Seller has paid all
income, estimated, excise, franchise, gross receipts, capital stock,
profits, stamp, occupation, sales, use, transfer, value added, property
(whether real, personal or mixed), employment, unemployment,
disability, withholding, social security, workers' compensation and
other taxes, and interest, penalties, fines, costs and assessments
(collectively, "Taxes"), due and payable with respect to the periods
covered by such Tax Returns (whether or not reflected thereon). There
are no tax liens on any of the properties or assets, real, personal or
mixed, tangible or intangible, of the Seller in connection with the
Business. Since March 31, 1997, the Seller in connection with the
Business has not incurred any tax liability other than in the ordinary
course of business. Except as set forth in Exhibit B, no Tax Return of
the Seller in connection with the Business has ever been audited. No
deficiency in Taxes for any period has been asserted by any taxing
authority which remains unpaid at the date hereof (the results of any
settlement being set forth on Exhibit B hereto), no written inquiries
or notices have been received by the Seller in connection with the
Business from any taxing authority with respect to possible claims for
Taxes and the Seller knows of no reason to believe that such an inquiry
or notice is pending or threatened, and there is no basis for any
additional claims or assessments for Taxes. The Seller in connection
with the Business has not agreed to the extension of the statute of
limitations with respect to any Tax Return or tax period. The Seller
has delivered to the Purchaser copies of the federal and state income
or
<PAGE> 10
franchise or other type of Tax Returns filed by the Seller in
connection with the Business for the past three years and for all other
past periods as to which the appropriate statute of limitations has not
lapsed.
J. Permits; Compliance with Applicable Law.
(i) General. The Seller is not in default under any,
and has complied with all, statutes, including the Americans with
Disabilities Act, ordinances, regulations, orders, judgments and
decrees of any court or governmental entity or agency, relating to the
Business or the Assets as to which a default or failure to comply might
have a Material Adverse Effect on the Business or the Assets. The
Seller has no knowledge of any basis for assertion of any violation of
the foregoing or for any claim for compensation or damages or otherwise
arising out of any violation of the foregoing. The Seller has not
received any notification of any asserted present or past failure to
comply with any of the foregoing which has not been satisfactorily
responded to in the time period required thereunder.
(ii) Permits. Set forth in Exhibit B is a complete and
accurate list of all permits, licenses, approvals, franchises and
authorizations issued by governmental entities or other regulatory
authorities, federal, state or local (collectively the "Permits"),
held by the Seller in connection with the Business. The Permits set
forth in Exhibit B are all the Permits required for the conduct of the
Business. All the Permits set forth in Exhibit B are in full force and
effect, and the Seller has not engaged in any activity which would
cause or permit revocation or suspension of any such Permit, and no
action or proceeding looking to or contemplating the revocation or
suspension of any such Permit is pending or, to the best of the
knowledge of the Seller, threatened. There are no existing defaults or
events of default or events or state of facts which with notice or
lapse of time or both would constitute a material default by the Seller
under any such Permit. The Seller has no knowledge of any default or
claimed or purported or alleged default or state of facts which with
notice or lapse of time or both would constitute a default on the part
of any party in the performance of any obligation to be performed or
paid by any party under any Permit set forth in Exhibit B. Except as
set forth in Exhibit B, the consummation of the transactions
contemplated hereby will in no way affect the continuation, validity or
effectiveness of the Permits set forth in Exhibit B or require the
consent of any person.
(iii) Environmental. (a) To the best of the knowledge
of the Seller, the Seller in connection with the Business, has duly
complied with, and the real estate owned by it or subject to the
leases listed in Exhibit B and the improvements thereon, and all other
real estate leased by the Seller in connection with the Business, and
the improvements thereon (all such owned or leased real estate
hereinafter referred to collectively as the "Premises") are in
compliance with, the provisions of all federal, state and local
environmental, health and safety laws, codes and ordinances and all
rules and regulations promulgated thereunder, except where the failure
to so comply would not have a Material Adverse Effect.
(b) To the best of the knowledge of the Seller,
the Seller in connection with the Business has been issued, and will
maintain until the date of the Closing, all required federal, state
and local permits, licenses, certificates and approvals relating to (i)
air emissions, (ii) discharges to surface water or ground water,
<PAGE> 11
(iii) noise emissions, (iv) solid or liquid waste disposal, (v) the
use, generation, storage, transportation or disposal of toxic or
hazardous substances or wastes (intended hereby and hereafter to
include any and all such materials listed in any federal, state or
local law, code or ordinance and all rules and regulations promulgated
thereunder, as hazardous or potentially hazardous), or (vi) other
environmental, health and safety matters.
(c) The Seller has not received any notice of,
and knows of no facts which might constitute violations of, any
federal, state or local environmental, health or safety laws, codes or
ordinances, and any rules or regulations promulgated thereunder,
which relate to the use, ownership or occupancy of any of the Premises
owned, leased or occupied by the Seller in connection with the
Business. The Seller is not in violation of any rights-of-way or
restrictions affecting any of the Premises or any rights appurtenant
thereto.
(iv) Medicare, Medicaid and CHAMPUS. The Business has
had no net revenues from the Medicare, Medicaid and CHAMPUS programs
during the calendar years 1994, 1995, 1996, and the first four (4)
months of 1997.
K. Licenses. The Seller does not produce or distribute any
product nor does it perform any service under a proprietary license
granted by another entity and it has not licensed its rights in
any current or planned products, designs or services to any other
entities. The Seller has the right to use all computer software,
including all property rights constituting part of that computer
software, used in connection with the Business (the "Computer
Software"). A list of all written licenses pertaining to the Computer
Software is set forth in Exhibit B (the "Licenses"). The Seller does
not have any knowledge that any of the Licenses may not be valid or
enforceable by the Seller or that the use of the Computer Software or
any of the Licenses may infringe upon or conflict with the rights of
any third party. The Seller has not granted any licenses to use the
Computer Software or any sub-licenses with respect to any of the
Licenses.
L. Inventories. The inventories and equipment of the Seller
in connection with the Business are in all material respects
merchantable and fully usable in the ordinary course of business.
M. Contractual and Other Obligations. Set forth in Exhibit B
is a list and brief description of all (i) contracts, agreements,
licenses, leases, arrangements (written or oral) and other documents to
which the Seller in connection with the Business is a party or by which
the Seller in connection with the Business is bound (including, in the
case of loan agreements, a description of the amounts of any
outstanding borrowings thereunder and the collateral, if any, for such
borrowings); (ii) obligations and liabilities of the Seller in
connection with the Business pursuant to uncompleted orders for the
purchase of materials, supplies, equipment and services for the
requirements of the Business with respect to which the remaining
obligation of the Seller in connection with the Business is in excess
of $7,500; and (iii) material contingent obligations and liabilities of
the Seller in connection with the Business (all of the foregoing being
hereinafter referred to as the "Contracts.") The Seller is not in
material default in the performance of any covenant or condition under
any Contract and no claim of such a default has been made and, to the
best of the knowledge of the Seller, no event has occurred which with
the giving of notice or the lapse of time would
<PAGE> 12
constitute a default under any covenant or condition under any
Contract, except where such default would not have a Material Adverse
Effect. The Seller is not a party to any Contract which would
terminate or be adversely affected by the consummation of the
transactions contemplated by this Agreement. The Seller in connection
with the Business is not a party to any Contract expected to be
performed at a loss. Originals or true, correct and complete copies of
all written Contracts have been provided to the Purchaser.
N. Compensation. Set forth in Exhibit D attached hereto is a
list of all written or oral agreements between the Business and each
person employed by or independently contracting with the Business with
regard to compensation, whether individually or collectively, and set
forth in Exhibit D is a list of all employees or independent
contractors of the Business entitled to receive annual compensation in
excess of $35,000 and their respective positions, job categories and
salaries. The transactions contemplated by this Agreement will not
result in any liability for severance pay to any employee or
independent contractor of the Business. The Business has not informed
any employee or independent contractor providing services to the
Business that such person will receive any increase in compensation or
benefits or any ownership interest in the Business.
O. Employee Benefit Plans. Except as set forth in Exhibit E
attached hereto, neither the Seller nor its parent corporation (the
"Parent") maintains or sponsors, nor are they required to make
contributions to, any pension, profit-sharing, savings, bonus,
incentive or deferred compensation, severance pay, medical, life
insurance, welfare or other employee benefit plan. All pension,
profit-sharing, savings, bonus, incentive or deferred compensation,
severance pay, medical, life insurance, welfare or other employee
benefit plans within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended (hereinafter
referred to as "ERISA"), in which the employees of the Business
participate (such plans and related trusts, insurance and annuity
contracts, funding media and related agreements and arrangements being
hereinafter referred to as the "Benefit Plans") comply with all
requirements of the Department of Labor (the "DOL") and the Internal
Revenue Service, and with all other applicable law, and neither the
Seller nor the Parent has taken or failed to take any action with
respect to the Benefit Plans which might create any liability on the
part of the Seller or the Purchaser. Each "fiduciary" (within the
meaning of Section 3(21)(A) of ERISA) as to each Benefit Plan has
complied in all respects with the requirements of ERISA and all other
applicable laws in respect of each such Benefit Plan. The Seller has
furnished to the Purchaser copies or accurate summaries of all Benefit
Plans and all financial statements, actuarial reports and annual
reports and returns filed with the Internal Revenue Service with
respect to such Benefit Plans for a period of three years prior to the
date hereof. Such financial statements, actuarial reports and annual
reports and returns are true and correct in all respects, and none of
the actuarial assumptions underlying such documents have changed since
the respective dates thereof. In addition:
(i) Each Benefit Plan intended to qualify under Section
401(a) of the Code has received a favorable determination
letter from the Internal Revenue Service as to its
qualification under Section 401(a) of the Code;
<PAGE> 13
(ii) Neither the Seller nor the Parent maintains,
sponsors or contributes to (nor are required to contribute to)
and has never withdrawn from, maintained, sponsored or
contributed to (nor has ever been required to contribute to)
a "defined benefit plan" (within the meaning of Section 3(35)
of ERISA), or a "multiemployer plan" (within the meaning of
Section 3(37) of ERISA);
(iii) Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
herein will result in the withdrawal (partially or totally
within the meaning of ERISA) from any Benefit Plan, or in any
withdrawal or other liability of any nature to the Seller, the
Parent or the Purchaser under any Benefit Plan;
(iv) No "prohibited transaction" (within the meaning of
Section 406 of ERISA or Section 4975(c) of the Code) has
occurred with respect to any Benefit Plan;
(v) No provision of any Benefit Plan or of any
agreement, and no act or omission of the Seller or the Parent
in any way limits, impairs, modifies or otherwise affects the
right of the Seller or the Parent to amend any Benefit Plan,
subject to the requirements of applicable law;
(vi) There are no contributions which are or hereafter
will be required to have been made to trusts on behalf of the
employees of the Business in connection with any Benefit Plan
that would constitute a "defined contribution plan" (within the
meaning of Section 3(34) of ERISA);
(vii) Other than claims in the ordinary course for
benefits with respect to the Benefit Plans, there are no
actions, suits or claims (including claims for income Taxes,
interest, penalties, fines or excise Taxes with respect
thereto) pending with respect to any Benefit Plan, or any
circumstances which might give rise to any such action, suit or
claim (including claims for income Taxes, interest, penalties,
fines or excise Taxes with respect thereto);
(viii) All reports, returns and similar documents with
respect to the Benefit Plans required to be filed with any
governmental agency have been so filed; and
(ix) Neither the Seller nor the Parent has any
obligation to provide health or other welfare benefits to
former, retired or terminated employees, except as specifically
required under Section 4980B of the Code or Section 601 of
ERISA. The Seller and the Parent has complied with the notice
and continuation requirements of Section 4980B of the Code and
Section 601 of ERISA and the regulations thereunder.
The Seller agrees that it will or cause the Parent to,
as of the Closing, fully vest all employees of the Business who become
employees of the Purchaser as a result of the transactions contemplated
herein in their account balances under the Plan.
<PAGE> 14
P. Labor Relations. There have been no violations of any
federal, state or local statutes, laws, ordinances, rules, regulations,
orders or directives with respect to the employment of individuals by,
or the employment practices or work conditions of the Business, or with
respect to the terms and conditions of employment, wages and hours,
which violations would have, either individually or in the aggregate, a
Material Adverse Effect. The Business is not engaged in any unfair
labor practice or other unlawful employment practice and there are no
charges of unfair labor practices or other employee-related complaints
pending or, to the best of the knowledge of the Seller, threatened
against the Business or before the National Labor Relations Board, the
Equal Employment Opportunity Commission, the Occupational Safety and
Health Review Commission, the Department of Labor or any other federal,
state, local or other governmental authority. There is no strike,
picketing, slowdown or work stoppage or organizational attempt pending
or, to the best of the knowledge of the Seller, threatened against or
involving the Business. No issue with respect to union representation
is pending or, to the best of the knowledge of the Seller, threatened
with respect to the employees of the Business. No union or collective
bargaining unit or other labor organization has ever been certified or
recognized by Business as the representative of any of the employees of
the Business.
Q. Increases in Compensation or Benefits. Except as set forth
in Exhibit D, subsequent to March 31, 1997, there have been no
increases in the compensation payable or to become payable to any of
the employees involved in the Business and there have been no payments
or provisions for any awards, bonuses, stock options, loans, profit
sharing, pension, retirement or welfare plans or similar or other
disbursements or arrangements for or on behalf of such employees (or
related parties thereof), in each case, other than pursuant to
currently existing plans or arrangements, if any, set forth in Exhibit
E; provided, however, that in no event was any such increase in
compensation or any such payment or provision made with respect to any
employees earning in excess of $20,000 per annum. All commissions
heretofore earned and all bonuses heretofore granted to employees
involved in the Business have been paid in full to such employees. The
vacation policy of the Business is set forth in Exhibit E. Except as
set forth in Exhibit D, no employee involved in the Business is
entitled to vacation time in excess of three weeks during the current
calendar year and no employee involved in the Business has any accrued
vacation or sick time with respect to any prior period.
R. Insurance. The Seller maintains insurance policies covering
all of its assets and properties and the various occurrences which may
arise in connection with the operation of the Business. Such policies
are in full force and effect and all premiums due thereon prior to or
on the date of the Closing have been paid in full. The Seller has
complied in all respects with all the provisions of such policies. A
complete list of the insurance policies maintained by the Seller with
regard to the Business is set forth in Exhibit B. There are no notices
of any pending or, to the best of the knowledge of the Seller,
threatened termination or premium increases with respect to any of such
policies. The Seller has not had any material casualty loss or
occurrence which may give rise to any claim of any kind not covered by
insurance and the Seller is not aware of any occurrence which may give
rise to any claim of any kind not covered by insurance. To the best of
the knowledge of the Seller, no third party has filed any claim against
the Seller for personal injury or property damage of a kind for which
liability insurance is generally available which is not fully insured,
subject only to the standard
<PAGE> 15
deductible. All claims against or involving the Business covered by
insurance have been reported to the insurance carrier on a timely basis.
S. Conduct of Business. The Seller is not restricted from
conducting the Business in any location by agreement or court decree.
T. Allowances. The Seller has no obligation to make allowances
to any of its customers or patients, except allowances which are
consistent with its past practices.
U. Patents, Trademarks, etc. Set forth in Exhibit F attached
hereto is a list and brief description of all of the patents,
registered and common law trademarks, service marks, tradenames,
copyrights, licenses and other similar rights of the Seller in
connection with the Business and applications for each of the
foregoing. The Seller owns all right, title and interest in and to all
such proprietary rights. To the best of the knowledge of the Seller,
the proprietary rights listed are all such rights necessary to the
conduct of the Business as currently conducted by the Seller; no
adverse claims have been made and no dispute has arisen with respect to
any of the said proprietary rights; and the operations of the Business
and the use by the Seller of such proprietary rights do not involve
infringement or claimed infringement of any patent, trademark, service
mark, tradename, copyright, license or similar right.
V. Power of Attorney. The Seller in connection with the
Business has not granted any power of attorney (revocable or
irrevocable) to any person, firm or corporation for any purpose
whatsoever.
W. Use of Names. All names under which the Business is
currently conducted are listed in Exhibit F. Except for Century Dental
Center I, P.C. and Century Dental Center II, P.C., there are no other
persons or businesses conducting businesses similar to those of the
Seller in the Commonwealth of Pennsylvania having the right to use or
using any of the names set forth in Exhibit F or any variants of such
names; and no other person or business has ever attempted to restrain
the Seller from using such names or any variants thereof.
X. Accounts Payable, Indebtedness, Etc. The accounts and notes
payable and accrued expenses reflected in the Financial Statements, and
the accounts and notes payable and accrued expenses incurred by the
Seller in connection with the Business subsequent to the date of the
Financial Statements, are in all respects valid claims that arose in
the ordinary course of business. Since March 31, 1997, the accounts
and notes payable, accrued expenses and debt of the Seller in
connection with the Business have been paid in a manner consistent
with past practice.
Y. No Foreign Person. The Seller is not a foreign person
within the meaning of Section 1445(b)(2) of the Code.
Z. Licensure, etc. Each individual employed or contracted with
by the Seller in connection with the Business to provide professional
services is licensed to provide such services and is otherwise in
compliance with all federal, state and local laws, rules and
regulations relating to such professional licensure. Each individual
now or formerly employed or contracted with by the Seller in connection
with the Business to
<PAGE> 16
provide professional services was duly licensed to provide such
services during all periods prior to the Closing when such employee or
independent contractor provided such services on behalf of the Seller.
The Seller in connection with the Business is in compliance with all
relevant state laws and precedents relating to the corporate practice
of the learned or licensed professions, and there are no material
claims, disputes, actions, suits, proceedings or investigations
currently pending, or, to the best of the knowledge of the Seller,
threatened or filed or commenced against or affecting the Business or
any such licensed professional providing services to the Seller on the
date of the Closing relating to such laws and precedents, and no such
material claim, dispute, action, suit, proceeding or investigation has
been filed or commenced during the five-year period preceding the date
of this Agreement, and the Seller is not aware of any basis for such a
valid claim. To the best of the knowledge of the Seller, the
acquisition of the Assets by the Purchaser (or its designee) as
contemplated by this Agreement will not affect the ability of the
Purchaser to operate the Business as heretofore operated in compliance
with all applicable laws provided that the Purchaser complies with all
applicable laws regarding the corporate practice of dentistry.
AA. Books and Records. The books and records of the Business
are in all material respects complete and correct, have been maintained
in accordance with good business practices and accurately reflect the
basis for the financial position and results of operations of the
Business set forth in the Financial Statements. All of such books and
records, including true and complete copies of all material written
Contracts, have been made available for inspection by the Purchaser and
its representatives.
BB. Litigation; Disputes. Except as set forth in Exhibit B,
there are no claims, disputes, actions, suits, investigations or
proceedings pending or, to the best of the knowledge of the Seller,
threatened against or affecting the Business or the Assets. Except as
set forth in Exhibit B, no such claim, dispute, action, suit,
proceeding or investigation has been pending or, to the best of the
knowledge of the Seller, threatened during the five-year period
preceding the date of this Agreement. There is no basis for any such
claim, dispute, action, suit, investigation or proceeding. The Seller
has no knowledge of any default under any such action, suit or
proceeding. The Seller in the conduct of the Business is not in
default in respect of any judgment, order, writ, injunction or decree
of any court or of any federal, state, municipal or other government
department, commission, bureau, agency or instrumentality or any
arbitrator.
CC. Location of Seller and Assets. Set forth in Exhibit B is
each location (specifying state, county and city) where the Seller in
connection with the Business, (i) has a place of business, (ii) owns or
leases real property and (iii) owns or leases any other property,
including inventory, equipment and furniture.
DD. Bank Accounts. Set forth in Exhibit G attached
hereto is a list of all bank accounts maintained in the
name of the Seller in connection with the Business, and a
brief description of the persons having power to sign
with respect to each such account.
EE. Disclosure. No representation or warranty made
under any Section hereof and none of the information
furnished by the Seller set forth herein, in the exhibits
hereto or in any document
<PAGE> 17
delivered by the Seller to the Purchaser, or any authorized
representative of the Purchaser, pursuant to this Agreement
contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements
herein or therein not misleading.
SECTION III
REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF THE PURCHASER
The Purchaser hereby represents and warrants to, and covenants
and agrees with, the Seller, as of the date hereof and as of the date
of the Closing, that:
A. Organization and Qualification. The Purchaser is duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to
purchase the Assets.
B. Authority. The execution and delivery of this Agreement by
the Purchaser, the performance by the Purchaser of its covenants and
agreements hereunder and the consummation by the Purchaser of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action. This Agreement constitutes a valid and
legally binding obligation of the Purchaser, enforceable against it in
accordance with its terms.
C. No Legal Bar; Conflicts. Neither the execution and delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby, violates any provision of the certificate of
incorporation or by-laws of the Purchaser or any statute, ordinance,
regulation, order, judgment or decree of any court or governmental
agency or board, or conflicts with or will result in any breach of any
of the terms of or constitute a default under or result in the
termination of or the creation of any lien pursuant to the terms of any
contract or agreement to which the Purchaser is a party or by which the
Purchaser or any of its assets is bound.
SECTION IV
ADDITIONAL COVENANTS OF THE
SELLER AND THE PURCHASER
A. Correspondence, Etc. The Seller covenants and agrees that,
subsequent to the Closing, it will deliver to the Purchaser, promptly
after the receipt thereof, all inquiries, correspondence and other
materials received by it from any person or entity relating to the
Business.
B. Books and Records. Each of the Purchaser and the Seller
covenants and agrees that, subsequent to the Closing, it shall give the
other party reasonable access to the historical financial books and
records and patient files of the Business (subject to applicable laws
regarding confidentiality of such patient files), to the extent such
books and records and files are not included in the Assets, for a
period of five years from the date of the Closing. Each of the
Purchaser and the Seller shall retain all such books and records and
files in substantially their condition at the time of
<PAGE> 18
the Closing. None of such books and records and files shall be
destroyed without the prior written approval of the other party
or without first offering such books and records and files to the other
party.
C. Discharge of Obligations. The Seller covenants and agrees,
subsequent to the Closing, to pay promptly and to otherwise fulfill and
discharge all obligations and liabilities of the Seller in connection
with the Business which are not Assumed Liabilities hereunder when due
and payable and otherwise prior to the time at which any of such
obligations or liabilities could in any way result in or give rise to a
claim against the Assets, the Business or the Purchaser, result in the
imposition of any lien, charge or encumbrance on any of the Assets, or
adversely affect the Purchaser's title to or use of any of the Assets
including, without limitation, any and all sales, use, transfer,
corporate, payroll and/or business and mercantile taxes, penalties and
interest owned to the Commonwealth of Pennsylvania and/or Marple
Township, and processing fees required by that certain Real Property
Lease (the "Lease") listed under "Real Property" in Exhibit B hereto
for the facility located at 400 South State Road, Springfield,
Pennsylvania, (the "Facility") in connection with the Assignment of
Lease to be entered into between the Purchaser and the Seller on the
date of the Closing for the Facility (the "Assignment of Lease").
D. Delivery of Funds. Subsequent to the Closing, the Seller
shall deliver on a daily basis any funds and any checks except for
those checks which relate to pre-closing receivables (as hereinafter
defined), notes, drafts and other instruments for the payment of money,
duly endorsed to the Purchaser, received by the Seller comprising
payment of any amounts due from customers of the Business or others for
services rendered by the Business, including pursuant to any provider
agreements constituting part of the Assets.
E. Collection of Accounts Receivable. The Purchaser covenants
and agrees to act as collection agent on behalf of the Seller with
respect to the accounts receivable of the Business which were
outstanding on the date of the Closing (the "pre-closing receivables")
and the Purchaser further covenants and agrees to use its reasonable
best efforts to collect such pre-closing receivables for a reasonable
period of time not to exceed one (1) year from the date hereof or such
shorter time upon the mutual agreement of the Seller and the Purchaser.
The Seller covenants and agrees to pay to the Purchaser a fee
equal to ten percent (10%) of the pre-closing receivables collected by
the Purchaser to compensate the Purchaser for the services rendered
with respect to the collection of the pre-closing receivables by the
Purchaser.
F. Post-Closing Third Party Consents. In the event that any
third party consents which the Seller is required to obtain (including
consent to the Assignment of Lease) are not obtained prior to Closing
and the Closing nonetheless occurs, the Seller hereby covenants to use
such party's best efforts to obtain such consents within 30 days
following the Closing.
G. Pass Through of Rights and Obligations. In the event that
the Seller is unable to obtain the necessary consents set forth in
Exhibit B hereto prior to the Closing and the Closing nevertheless
occurs, the Seller agrees that until such time
<PAGE> 19
as such consents are obtained or in the event the Seller is unable to
obtain such consents, the Seller shall pass through to the Purchaser
the benefits and the obligations arising under the agreements
listed under "Real Property", "Contracts" and "Provider Source
Contracts" in Exhibit B hereto as if such agreements were assigned to
the Purchaser (or its designee) pursuant to this Agreement. The
Purchaser agrees that such pass through of rights and obligations shall
satisfy all obligations of the Seller to obtain the necessary consents
set forth in Exhibit B.
H. Assignment of Lease. The Purchaser covenants and agrees
that within ten (10) business days of receiving written notice from
Marple XYZ Associates (the "Landlord") that the Landlord consents to
the Assignment of Lease, the Purchaser shall pay to the Seller (i)
$7,542 in immediately available funds, which amount shall represent the
security deposit under the Lease, less fifteen percent (15%), and (ii)
the Purchaser's pro rata share (from the date of the Closing) of the
rental payment under the Lease for the month of May, 1997. In the
event that the Landlord's consent is not granted on or before May 31,
1997, the Purchaser may elect to pay to the Seller the rental payment
for the month of June, and, in such event, the Seller covenants and
agrees to timely pay to the Landlord the monthly rental payment for the
month of June. In the event that the Landlord does not consent to the
Assignment of Lease, each of the Purchaser and the Seller covenants and
agrees that the Purchaser (or its designee) and the Seller shall enter
into a sublease for the Facility.
SECTION V
CLOSING
A. Time and Place of Closing. The closing of the purchase and
sale of the Assets as set forth herein (the "Closing") shall be held on
May 20, 1997 at such location or in such manner as is mutually agreed
upon by the parties.
B. Delivery of Assets. Delivery of the Assets shall be made by
the Seller to the Purchaser (or its designee) at the Closing by
delivering such deeds, bills of sale, assignments and other instruments
of conveyance and transfer, and such powers of attorney, as shall be
effective to vest in the Purchaser (or its designee) title to or other
interest in, and the right to full custody and control of, the Assets,
free and clear of all liens, charges, encumbrances and security
interests whatsoever.
C. Tax Matters. All transfer, documentary, stamp,
registration, value added, sales, use and other such taxes and fees
(including any penalties and interest) incurred in connection with this
Agreement shall be borne and paid by the Seller when due, and the
Seller will, at its own expense, file all necessary tax returns and
other documentation with respect to all such taxes and fees.
D. Assumption of Liabilities. At the Closing, the Purchaser
(or its designee) shall deliver to the Seller such instruments as shall
be sufficient to effect the assumption by the Purchaser (or its
designee) of the Assumed Liabilities.
<PAGE> 20
E. Contracts and Books. At the Closing, the Seller shall make
available to the Purchaser the Contracts and the books and records of
the Business constituting a part of the Assets.
F. Additional Steps. At the Closing, the Seller shall take all
steps required to put the Purchaser (or its designee) in actual
possession and control of the Assets.
SECTION VI
CONDITIONS TO THE SELLER'S OBLIGATIONS TO CLOSE
The obligations of the Seller to sell the Assets and otherwise
consummate the transactions contemplated by this Agreement at the
Closing are subject to the following conditions precedent, any or all
of which may be waived by the Seller in its sole discretion, and each
of which the Purchaser hereby agrees to use its best efforts to satisfy
at or prior to the Closing:
A. No Litigation. No action, suit or proceeding against the
Seller or the Purchaser relating to the consummation of any of the
transactions contemplated by this Agreement or any governmental action
seeking to delay or enjoin any such transactions shall be pending or
threatened.
B. Representations and Warranties. The representations and
warranties made by the Purchaser herein shall be correct as of the date
of the Closing in all respects with the same force and effect as though
such representations and warranties had been made as of the date of the
Closing, and on the date of the Closing, the Purchaser shall deliver to
the Seller a certificate dated the date of the Closing to such effect.
All the terms, covenants and conditions of this Agreement to be
complied with and performed by the Purchaser on or before the date of
the Closing shall have been duly complied with and performed in all
respects, and, on the date of the Closing, the Purchaser shall deliver
to the Seller a certificate dated the date of the Closing to such
effect.
C. Other Certificates. The Seller shall have received such
additional certificates, instruments and other documents, in form and
substance satisfactory to it and its counsel, as it shall have
reasonably requested in connection with the transactions contemplated
hereby.
D. Employment Agreement and Modification Agreement. The
Purchaser (or its designee) and Jonathan Nash ("Nash") shall have
entered into an employment agreement in the form of Exhibit H attached
hereto (the "Employment Agreement") and a consent to assignment and
modification agreement in the form of Exhibit H-2 attached hereto (the
"Modification Agreement").
E. Assumption of Liabilities. The Seller shall have received
evidence, in form and substance satisfactory to it and its counsel, of
the assumption of the Assumed Liabilities listed in Schedule II hereto.
<PAGE> 21
SECTION VII
CONDITIONS TO THE PURCHASER'S OBLIGATION TO CLOSE
The obligation of the Purchaser to purchase the Assets and
otherwise consummate the transactions contemplated by this Agreement at
the Closing is subject to the following conditions precedent, any or
all of which may be waived by the Purchaser in its sole discretion, and
each of which the Seller hereby agree to use its best efforts to
satisfy at or prior to the Closing:
A. Opinion of Counsel. The Purchaser shall have received an
opinion of Brooks & Cahill, Attorneys at Law, counsel for the Seller,
delivered to the Purchaser pursuant to the instructions of the Seller,
dated the date of the Closing, in form and substance satisfactory to
the Purchaser and its counsel, Messrs. Haythe & Curley, to the effect
that:
(i) The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Florida, and is duly qualified to do business in the
Commonwealth of Pennsylvania. The Seller has full corporate
power and authority to own its properties and to conduct the
businesses in which it is now engaged.
(ii) This Agreement has been duly authorized, executed
and delivered by the Seller and constitutes the valid and
legally binding obligation of the Seller, enforceable against
the Seller in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting creditors'
rights generally or by general principles of equity.
(iii) Neither the execution and delivery of this
Agreement, nor the consummation of the transactions
contemplated hereby, violates any provision of the articles of
incorporation or by-laws of the Seller. To the knowledge of
such counsel, based solely upon a representation from the
Seller, neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated thereby,
violates any statute, ordinance, regulation, order, judgment or
decree of any court or governmental agency or conflicts with or
will result in any breach of any of the terms of or constitute
a default under or result in the termination of or the creation
of any lien pursuant to the terms of any contract or agreement
(related to the Business) to which the Seller is a party or by
which the Seller or the Assets (as such term is defined in the
Agreement) is bound.
(iv) The deeds, bills of sale, assignments and other
instruments of transfer of ownership delivered by the Seller
have been duly executed and delivered and are valid and binding
in accordance with their terms. To the knowledge of such
counsel, based solely upon a representation of the Seller, the
deeds, bills of sale, assignments and other instruments of
transfer of ownership delivered by the Seller are sufficient to
convey to the Purchaser (or
<PAGE> 22
its designee) all the right, title and interest of the Seller
in and to the Assets, free and clear of any liens, charges,
security interest or claims whatsoever except for those liens
set forth in Exhibit B.
(v) To the knowledge of such counsel, based solely upon
representation of the Seller there are no claims, disputes,
actions, suits or proceedings pending or threatened against the
Seller with regard to the Business or the Assets.
B. No Litigation. No action, suit or proceeding against the
Seller or the Purchaser relating to the consummation of any of the
transactions contemplated by this Agreement nor any governmental action
seeking to delay or enjoin any such transactions shall be pending or
threatened.
C. Representations and Warranties. The representations and
warranties made by the Seller herein shall be correct as of the date of
the Closing in all respects with the same force and effect as though
such representations and warranties had been made as of the date of the
Closing, and on the date of the Closing, the Seller shall deliver to
the Purchaser a certificate dated the date of the Closing to such
effect. All the terms, covenants and conditions of this Agreement to
be complied with and performed by the Seller on or before the date of
the Closing shall have been duly complied with and performed in all
respects, and on the date of the Closing, the Seller shall deliver to
the Purchaser a certificate dated the date of the Closing to such
effect.
D. Other Certificates. The Purchaser shall have received such
other certificates, instruments and other documents, in form and
substance satisfactory to the Purchaser and counsel for the Purchaser,
as it shall have reasonably requested in connection with the
transactions contemplated hereby.
E. Sale of All the Assets. All of the Assets of the Business,
with the exception of the Excluded Assets, shall be sold to the
Purchaser (or its designee) at the Closing.
F. Third Party Consents. The Purchaser shall have received all
necessary consents of third parties under the contracts, agreements,
leases and other instruments of the Business, which consents shall not
provide for the acceleration of any liabilities or any other detriment
to the Purchaser or the Business.
G. Malpractice Insurance. The Seller shall present evidence
satisfactory to the Purchaser that each professional employed by the
Business shall have malpractice insurance in such amounts as are
necessary and customary for such professionals.
H. Employment Agreement and Modification Agreement. The
Purchaser (or its designee) and Nash shall have entered into the
Employment Agreement and Modification Agreement.
I. Governmental Licenses and Permits. The Purchaser (and its
designee) have obtained all required authorizations, permits and
licenses required for it to operate the Business.
<PAGE> 23
J. Assignment of Lease. The Purchaser (or its designee) and
the Seller shall have entered into the Assignment of Lease.
SECTION VIII
INDEMNIFICATION
A. Indemnification by the Seller. The Seller shall indemnify
and hold harmless the Purchaser from and against all losses, claims,
taxes, assessments, demands, damages, liabilities, obligations, costs
and/or expenses (hereinafter referred to collectively as the
"Purchaser's Damages"), including, without limitation, Purchaser's
Counsel Expenses (as hereinafter defined), sustained or incurred by the
Purchaser (or its designee) in any action, claim or proceeding (i)
between the Purchaser and the Seller or (ii) between the Purchaser and
any third party or (iii) otherwise (a) arising out of or relating to
the breach of any of the obligations, covenants or provisions of, or
the inaccuracy of any of the representations or warranties made by the
Seller herein or (b) arising out of or relating to any liabilities or
obligations of the Seller which are not Assumed Liabilities including,
without limitation, any and all sales, use, transfer, corporate,
payroll, and/or business and mercantile taxes, penalties, and interest,
owed to the Commonwealth of Pennsylvania and/or Marple Township, and
any and all fees incurred in connection with the Assignment of Lease.
For purposes hereof, "Purchaser's Counsel Expenses" shall mean
reasonable fees and disbursements of counsel howsoever sustained or
incurred by the Purchaser (or its designee), including, without
limitation, in any action or proceeding between the Purchaser and any
third party. In addition to the right of the Purchaser to
indemnification hereunder, the Purchaser shall have the right from time
to time to set off the amount of any of the Purchaser's Damages that
the Purchaser is entitled to indemnification thereof against any
Contingent Payments. In the event that the Purchaser exercises its
right under this Section VIII(A) to set off the amount of any of the
Purchaser's Damages against any Contingent Payment and the Seller
disputes the validity of the Purchaser's Damages, the Purchaser agrees
to place such disputed amount in an escrow account to be held by Haythe
& Curley until the dispute is resolved pursuant to the terms of this
Section VIII(A) and Section XI(F) hereof. Any amounts set off by the
Purchaser which are later awarded to the Seller in accordance with
Section XI(F) hereof shall accrue interest at a rate of 8% per annum
from the time of any such set off and shall include reasonable fees and
disbursements of counsel incurred by the Seller.
B. Indemnification by the Purchaser. The Purchaser shall
indemnify and hold harmless the Seller from and against any and all
losses, claims, assessments, demands, damages, liabilities,
obligations, costs and/or expenses (hereinafter referred to
collectively as the "Seller's Damages"; the Seller's Damages and the
Purchaser's Damages are sometimes referred to herein as the "Damages"),
including, without limitation, Seller's Counsel Expenses (as
hereinafter defined) sustained or incurred by the Seller in any action
or proceeding between (i) the Seller and the Purchaser or (ii) the
Seller and any third party or (iii) otherwise (a) by reason of the
breach of any of the obligations, covenants or provisions of, or the
inaccuracy of any of the representations or warranties made by, the
Purchaser herein, or (b) arising out of or relating to any
<PAGE> 24
liabilities or obligations which are Assumed Liabilities. For purposes
hereof, "Seller's Counsel Expenses" shall mean reasonable fees and
disbursements of counsel howsoever sustained or incurred by the
Seller, including, without limitation, in any action or proceeding
between the Seller and the Purchaser or in any action or proceeding
between the Seller and a third party.
C. Procedure for Indemnification. In the event that any party
hereto shall incur (or anticipates that it may incur in the case of
third party claims) any Damages in respect of which indemnity may be
sought by such party pursuant to this Section VIII, the party
indemnified hereunder (the "Indemnitee") shall notify the party or
parties providing indemnification (the "Indemnitor") promptly; in the
case of third party claims, such notice shall in any event be given
within thirty (30) days of the filing or assertion of any claim against
the Indemnitee stating the nature and basis of such claim; provided,
however, that any delay or failure to notify any Indemnitor of any
claim shall not relieve it from any liability except to the extent that
the Indemnitor demonstrates that the defense of such action is
materially prejudiced by such delay or failure to notify. In the case
of third party claims, the Indemnitor shall, within ten (10) days of
receipt of notice of such claim, notify the Indemnitee of its intention
to assume the defense of such claim at its own expense. If the
Indemnitor shall not assume the defense of any such claim or litigation
resulting therefrom, the Indemnitee may defend against any such claim
or litigation in such manner as it may deem appropriate and the
Indemnitee may settle such claim or litigation on such terms as it may
deem appropriate. In the event that a dispute arises concerning the
obligation of the Indemnitor to assume the defense of a claim, or a
dispute arises concerning a claim hereunder which does not involve a
third party claim, or in the event that there is any other dispute
relating to indemnification, the parties shall submit any such dispute
to arbitration pursuant to Section XI(F) hereof; provided, however,
that the parties agree to negotiate in good faith for a period of at
least sixty (60) days prior to initiating arbitration to resolve any
dispute. If it shall be finally determined that the Indemnitor failed
to assume the defense of any claim for which the Indemnitor is liable
to the Indemnitee for Damages, then the expense of defending the claim
shall be borne by the Indemnitor. Payment of the Damages shall be made
within ten (10) days of a final determination of a claim.
<PAGE> 25
A final determination of a claim shall be (i) a judgment of any
court determining the validity of a disputed claim, if no appeal is
pending from such judgment or if the time to appeal therefrom has
elapsed, (ii) an award of any arbitration determining the validity of
such disputed claim, it there is not pending any motion to set aside
such award or if the time within which to move to set such award aside
has elapsed, (iii) a written termination of the dispute with respect to
such claim signed by all of the parties thereto or their attorneys,
(iv) a written acknowledgement of the Indemnitor that he or it no
longer disputes the validity of such claim, or (v) such other evidence
of final determination of a claim as shall be acceptable to the
parties.
SECTION IX
BROKERS AND FINDERS
A. The Seller's Obligations. The Purchaser shall not have any
obligation to pay any fee or other compensation to any person, firm or
corporation dealt with by the Seller in connection with this Agreement
and the transactions contemplated hereby and the Seller hereby agrees
to indemnify and save the Purchaser (or its designee) harmless from any
liability, damage, cost or expense arising from any claim for any such
fee or other compensation.
<PAGE> 26
B. The Purchaser's Obligations. The Seller shall not have any
obligation to pay any fee or other compensation to any person, firm or
corporation dealt with by the Purchaser in connection with this
Agreement and the transactions contemplated hereby and the Purchaser
agrees to indemnify and save the Seller harmless from any liability,
damage, cost or expense arising from any claim for any such fee or
other compensation.
SECTION X
TRANSFER OF NAME
At the Closing, the Seller shall deliver to the Purchaser a
written consent duly executed by the Seller evidencing its consent to
the use by the Purchaser and any subsidiaries, affiliated companies or
assigns of the Purchaser of the name "Century Dental" and all variants
thereof.
SECTION XI
MISCELLANEOUS
A. Notices. All notices, requests or instructions hereunder
shall be in writing and delivered personally, sent by telecopy or
sent by registered or certified mail, postage prepaid, as follows:
(1) If to the Seller:
c/o Princeton Dental Management Corp.
7421 West 100 Place
Bridgeview, Illinois 60455
Attention: Chief Financial Officer
Telecopy No.: (708) 430-8031
Telephone No.: (708) 974-4000
with a copy to:
Brooks & Cahill, Attorneys at Law
208 S. LaSalle #1855
Chicago, Illinois 60604
Attention: Kevin Cahill, Esq.
Telecopy No.: (312) 641-6116
Telephone No.: (312) 641-6105
(3) If to the Purchaser:
1018 West Ninth Avenue
King of Prussia, Pennsylvania 19406
Attention: Joseph Frank
Telecopy No.: (610) 992-3392
Telephone No.: (610) 992-3319
<PAGE> 27
with a copy to:
Haythe & Curley
237 Park Avenue
New York, New York 10017
Attention: Robert A. Ouimette, Esq.
Telecopy No.: (212) 682-0200
Telephone No.: (212) 880-6000
Any of the above addresses may be changed at any time by notice given
as provided above; provided, however, that any such notice of change of
address shall be effective only upon receipt. All notices, requests or
instructions given in accordance herewith shall be deemed received
on the date of delivery, if hand delivered or telecopied, and five
business days after the date of mailing, if mailed.
B. Survival of Representations. Each representation, warranty,
covenant and agreement of the parties hereto herein contained shall
survive the Closing, notwithstanding any investigation at any time made
by or on behalf of any party hereto, for a period of two (2) years from
the date of the Closing; except (a) for covenants and agreements to be
performed subsequent to the Closing and (b) that nothing in the
foregoing shall be deemed to diminish any Indemnitor's indemnification
obligations to an Indemnitee respecting (i) claims for Damages made
prior to the date which is two (2) years after the date of the Closing
or (ii) claims for Damages based on breaches of Sections II(I) or II(J)
and common law fraud, which shall survive for the duration of the
applicable statutes of limitations periods governing third party claims
made with respect to such liabilities.
C. Entire Agreement. This Agreement and the documents referred
to herein contain the entire agreement among the parties hereto
with respect to the transactions contemplated hereby, and no
modification hereof shall be effective unless in writing and signed by
the party against which it is sought to be enforced.
D. Further Assurances. Each of the parties hereto shall use
such party's best efforts to take such actions as may be necessary or
reasonably requested by the other parties hereto to carry out and
consummate the transactions contemplated by this Agreement.
E. Expenses. Each of the parties hereto shall bear such
party's own expenses in connection with this Agreement and the
transactions contemplated hereby.
F. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or any breach hereof, shall, be settled by
arbitration in accordance with the rules of the American Arbitration
Association then in effect and judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
The arbitration shall be held in Chicago, Illinois.
G. Regulatory Matters. The Seller agrees that if as a result
of a regulatory change or for any other reason, the Purchaser shall
determine that it is necessary or desirable to restructure the manner
in which the Business is conducted or
<PAGE> 28
the manner in which services are provided, the Seller shall, upon 30
days' prior written notice of the Purchaser, assist the Purchaser to
take promptly all necessary steps (as set forth in such notice) to
carry out such restructuring. The expenses related to such
restructuring shall be borne by the Purchaser.
H. Invalidity. Should any provision of this Agreement be held
by a court or arbitration panel of competent jurisdiction to be
enforceable only if modified, such holding shall not affect the
validity of the remainder of this Agreement, the balance of which shall
continue to be binding upon the parties hereto with any such
modification to become a part hereof and treated as though originally
set forth in this Agreement. The parties further agree that any such
court or arbitration panel is expressly authorized to modify any such
unenforceable provision of this Agreement in lieu of severing such
unenforceable provision from this Agreement in its entirety, whether by
rewriting the offending provision, deleting any or all of the offending
provision, adding additional language to this Agreement, or by making
such other modifications as it deems warranted to carry out the intent
and agreement of the parties as embodied herein to the maximum extent
permitted by law. The parties expressly agree that this Agreement as
modified by such court or arbitration panel shall be binding upon and
enforceable against each of them. In any event, should one or more of
the provisions of this Agreement be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions hereof, and if
such provision or provisions are not modified as provided above, this
Agreement shall be construed as if such invalid, illegal or
unenforceable provisions had never been set forth herein.
I. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the successors and assigns of the
Seller and the Purchaser, respectively.
J. Governing Law. The validity of this Agreement and of any of
its terms or provisions, as well as the rights and duties of the
parties under this Agreement, shall be construed pursuant to and in
accordance with the laws of the Commonwealth of Pennsylvania.
K. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
* * *
<PAGE> 29
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of the date first above written.
PRINCETON MEDICAL MANAGEMENT
NORTHEAST, INC.
By ____________________________
Name:
Title:
VALLEY FORGE DENTAL
ASSOCIATES, INC.
By ____________________________
Name:
Title:
<PAGE> 30
Schedule I
EXCLUDED ASSETS
1. Accounts Receivable of the Business outstanding on or prior to the date
of Closing.
2. Cash.
<PAGE> 31
Schedule II
LIABILITIES TO BE ASSUMED
1. Acquisition Promissory Note dated March 31, 1993 payable to Cendent
Associates Limited Partnership in the current outstanding amount of
$91,089.38.
2. Real Property Lease dated November 7, 1991, between Marple XYZ Associates
and Century Dental Centers I, P.C., as amended by Letter Agreement dated
March 24, 1993, by and among Marple XYZ Associates, Century Dental Center
I, P.C. and Princeton Medical Management Northeast, Inc. and as assigned
to Princeton Medical Management Northeast, Inc. on March 31, 1993.
3. Independent Contractor Agreement originally dated March 31, 1993, and as
amended July 1, 1993 and December 2, 1994 and as extended on December 7,
1995 and as amended May 19, 1997 by and between Princeton Medical
Management Northeast, Inc., Century Dental Center I, P.C. and Jonathan
Nash, D.D.S.
4. Independent Contractor Agreement by and between Dr. Edward B. Basner and
Century Dental Center, P.C.
5. Independent Contractor Agreement by and between Richard P. Kaufman,
D.M.D. and Century Dental Center, P.C.
6. Provider Source Contracts listed in Exhibit B, number 11.
<PAGE> 32
Schedule III
CONTINGENT PAYMENTS
The Target 100% net operating revenues and Contingent Payments
are as follows:
(1) Contingent Period Ending May 31, 1997:
Target 100% net operating
revenues $500,000
Target 100% Contingent Payments $90,000
(2) Contingent Period Ending May 31, 1998:
Target 100% net operating
revenues $550,000
Target 100% Contingent Payments $50,000
The aggregate amount of the Contingent Payments payable
to the Seller shall be determined by multiplying the Target 100%
Contingent Payments for the applicable Contingent Period by the Contingent
Multiplier (as hereinafter defined) for such Contingent Period.
The "Contingent Multiplier" shall be equal to the lesser of (i)
100%, and (ii) a fraction, expressed as a percentage, the numerator of which
shall be the net operating revenues of the Company for the applicable
Contingent Period calculated in accordance with Sections I(D) and (E) and the
denominator of which shall be the "Target 100% net operating revenues" set
forth above for such Contingent Period.
Notwithstanding anything else in this Agreement to the contrary,
the Purchaser shall have no obligation to make the Contingent Payments provided
for in Section I(D) with respect to any Contingent Period if the net operating
revenues of the Company are less than 90% of the Contingent Target 100%
therefor for any such Contingent Period. The maximum Contingent Payments for
any Contingent Period shall be 100% of the Target 100% Contingent Payments for
such Contingent Period.
<PAGE> 33
Schedule IV
ALLOCATION OF PURCHASE PRICE
The Purchase Price shall be allocated to the Assets in accordance with the
following:
1. to fixed assets at their fair market value;
2. to accounts receivable at their net collectible value;
3. to cash in an amount equal to the aggregate amount thereof; and
4. remainder to goodwill.
<PAGE> 34
EXHIBIT B
CERTAIN CONSENTS, LIENS,
CONTRACTS, PERMITS AND OTHER MATTERS
1. Required Consents.
All Contracts or Leases marked with an asterisk in Sections (2) and (5)
require a prior written consent for assignment.
2. Real Property.
(a) Owned:
(b) Leased:
(1) Lessor: Marple XYZ Associates
Lessee: Century Dental Centers I, P.C., assigned to
Princeton Medical Management Northeast,
Inc. by Letter Agreement dated March 24, 1993
Date: November 7, 1991, as amended March 24, 1993
Term: 10 Years plus options
Premises: 400 South State Road, Springfield, PA
Square Feet: 2820
Rental
(Annual):
Year Base Operating Total
--------- ------- --------- -------
[S] [C] [C] [C]
1992 $59,246 $4,005 $63,431
1993-1994 $54,990 $4,005 $58,995
1995-1997 $62,040 $4,005 $66,045
1998-2001 $64,155 TBD TBD
Assignment: Not assignable without prior written
consent of lessor, which may not be
unreasonably withheld or delayed. Sale
of 51% of the value of the assets of lessee
is deemed an assignment. Options are not
assignable. Request for approval of
assignment requires $500 processing fee
except first request does not.
<PAGE> 35
3. Liens.
<TABLE>
<CAPTION>
Secured
Debtor Party Collateral Date filed No./Jurisdiction
------ ------- ---------- ---------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Century Dental First Executive Bank Blanket lien on assets Date filed: 1/6/92
Centers I, P.C. File No.: 92-51
Jurisdiction: Delaware
County, PA
Continuation
filed: 8/16/96
File No.: 96-202001
Century Dental Oral Scan Computer Date filed: 6/16/92
Centers, P.C. First Executive Bank Imaging System File No.: 92-1465
Continuation
filed: 8/16/96
File No.: 96-202002
- -----------------------------------------------------------------------------------------------------
Jonathan David Nash United States All property and rights Federal Tax Liens
Century Dental (1) Lien No.: 403521
Centers Lien Date: 12/18/92
Amount: $100,723.84
(2) Lien No.: 403522
Lien Date: 12/18/92
Amount: $5,622.63
(3) Lien No.: 404354
Lien Date: 7/22/93
Amount: $5,819.48
(4) Lien No.: 404817
Lien Date: 1/11/94
Amount: $42,675.48
(5) Lien No.: 404818
Lien Date: 1/11/94
Amount: $84,362.65
- -----------------------------------------------------------------------------------------------------
Princeton Medical Century Dental Blanket lien on assets Date filed: 4/6/93
Management Center I, P.C. File No.: 93-708
Northeast, Inc. Cendent Associates Jurisdiction: Delaware
Limited Partnership County, PA
- -----------------------------------------------------------------------------------------------------
Princeton Medical Century Dental Blanket lien on assets Date filed: 4/6/93
Management Center I, P.C. File No.: 21811616
Northeast, Inc. Jurisdiction: State of Delaware
</TABLE>
4. Litigation.
(a) Dr. Jonathan D. Nash d/b/a Century Dental Centers I & II v. United
States
Case No.: 93-CV-5877
Filed: 11/5/93, E.D.P.A.
Status: Judgment in favor of United States in the amount of
$250,000 entered 7/11/96
(b) Century Dental Centers Inc. v. Bell Telephone PA
Case No.: 91-018028
Filed: 11/27/91, Delaware Common Pleas Court, PA
<PAGE> 36
Status: Award of arbitrators entered in favor of Bell Telephone
in the amount of $7,000 on counterclaim. Order to
satisfy award filed 5/7/93.
(c) Century Dental Centers v. Kirstin Horan
Case No.: 95-050061
Filed: 1/9/95, Delaware Common Pleas Court, PA
Status: Release executed by Kirstin Horan on June 20, 1996
5. Contracts.
(a) Independent Contractor Agreement by and between Dr.
Edward B. Basner and Century Dental Centers for an open-ended
term with 180 days written notice required for termination.
(b) Independent Contractor Agreement by and between
Century Dental Centers, P.C. and Richard P. Kaufman, D.M.D.
effective August 2, 1995 for one year term; automatically
renewed for successive one year periods, unless terminated upon
30 days written notice.
(c) Independent Contractor Agreement originally dated
March 31, 1993, and as amended July 1, 1993 and December 2, 1994
and as extended on December 7, 1995 and May 15, 1997 by and
between Princeton Medical Management Northeast, Inc., Century
Dental Center I, P.C. and Jonathan Nash, D.D.S. Not assignable
by Century without Princeton's prior written approval.
Princeton may assign its interest to a purchaser of the dental
practice without Century's prior written consent.
(d) Security Agreement and Collateral Assignment of Lease
dated as of March 31, 1993 by and between Princeton Medical
Management Northeast, Century Dental Centers I, P.C. and Cendent
Associates Limited Partnership
(e) Guaranty dated as of March 31, 1993 by and between
Princeton Dental Management Corporation and Century Dental
Centers I, P.C., Cendent Associates Limited Partnership, and
Jonathan Nash
(f) Revolving Sales Agreement dated December 29, 1995 by
and between Norwest Financial CDC and Century Dental Center
6. Loans.
<PAGE> 37
7. Insurance.
<TABLE>
<CAPTION>
Insured Carrier Coverage Policy No.
- ------- ------- -------------------- ----------
<S> <C> <C> <C>
Century Dental Centers State Workmen's Insurance Fund Workers' 03611065
Compensation
Princeton Medical St. Paul Fire & Marine Professional FK06402164/
Management Northeast Insurance Company Office/ Commercial FK06401861
</TABLE> General Liability
8. Vehicles.
9. Promissory Notes
(a) Note payable to Century Dental Centers I, P.C.
(b) Note payable to Cendent Associates Limited Partnership
10. Computer Software Matters
11. Provider Source Contracts
1. Between Insurance Dentists of America and Jonathan
Nash, and between IDOA and Barry Gillespie, approved November
22, 1994. Either party has right to terminate for any reason
upon 60 days written notice to the other. Either party may
terminate for cause upon 15 days prior written notice.
Agreement may not be assigned by Dentist without prior written
consent of IDOA.
2. Between The Guardian and Jonathan Nash, approved
November 23, 1994, and between The Guardian and Barry Gillespie,
approved January 5, 1995. One year term from the date contract
was signed. Renewed automatically for subsequent 12 month
periods unless terminated by either party. Either party may
terminate for cause if violation of the Agreement is not
remedied within 30 days. Either party may terminate without
cause by giving written notice to the other party at least 30
days prior to date of termination. Dentist may not assign
without the prior written consent of The Guardian.
<PAGE> 38
3. Between Prudential Dental Network and Century Dental
Center (Edward Basner and Barry Gillespie as participating
providers) effective January 3, 1994. May be terminated without
cause by either party by giving 30 days written notice.
4. United Concordia Site Application completed by
Jonathan Nash and Provider Credential Applications completed by
Barry Gillespie, Edward Basner, Richard Kaufman.
5. Primary Dentist Agreement between U.S. Healthcare,
Dental Plan, Inc. ("Dental Plan") and Richard Kaufman. May be
terminated by either party by written notice given at least 90
days in advance of such termination. May not be assigned
without the written consent of Dental Plan.
6. Specialist Dental Agreement between U.S. Healthcare
Dental Plans, Inc. ("Dental Plans") and Dr. Gillespie effective
July 26, 1994. Continues in effect unless terminated by either
party upon 90 days written notice. May not be assigned without
the written consent of Dental Plans.
7. Primary Dentist Agreement plus addendum between
Health Maintenance Organization of Pennsylvania, Inc. ("HMO")
and Dr. Edward B. Basner. May be terminated by either party by
written notice given at least 90 days in advance of such
termination. May not be assigned without the written consent of
HMO.
8. Primary Dentist Agreement between U.S. Healthcare,
Dental Plan, Inc. ("Dental Plan") and Dr. Edward B. Basner. May
be terminated by either party by written notice given at least
90 days in advance of such termination. May not be assigned
without the written consent of Dental Plan.
9. Primary Dentist Agreement plus Addendum between
Health Maintenance Organization of Pennsylvania, Inc. ("HMO")
and Dr. Jonathan Nash. May be terminated by either party by
written notice given at least 90 days in advance of such
termination. May not be assigned without the written consent of
HMO.
10. Primary Dentist Agreement between U.S. Healthcare,
Dental Plan, Inc. ("Dental Plan") and Dr. Jonathan Nash. May be
terminated by either party by written notice given at least 90
days in advance of such termination. May not be assigned
without the written consent of Dental Plan.
<PAGE> 39
11. Primary Dentist Agreement plus addendum between Health
Maintenance Organization of Pennsylvania, Inc. and
Dr. Richard Kaufman. May be terminated by either party by
written notice given at least 90 days in advance of such
termination. May not be assigned without the written consent
of HMO.
12. Independent Dentist Listing Agreement dated December 2, 1994
between Dental Directory Services, Inc. ("DDS") and Jonathan
Nash. May be terminated by either party upon not less than 60
days prior written notice. May not be assigned without prior
written consent of DDS.
13. Independent Dentist Listing Agreement dated December 2, 1994
between Dental Directory Services, Inc. ("DDS") and Barry
Gillespie. May be terminated by either party upon not less than
60 days prior written notice. May not be assigned without prior
written consent of DDS.
14. Independent Dentist Listing Agreement dated December 2, 1994
between Dental Directory Services, Inc. ("DDS") and Edward B.
Basner. May be terminated by either party upon not less than
60 days prior written notice. May not be assigned without prior
written consent of DDS.
15. Provider Agreement between Countrywide Dental Program
and Jonathan Nash. In effect for 1 year and then automatically
renewed subject to cancellation by either party without cause
upon 60 days written notice. May not be assigned without prior
written consent.
16. Dental Care Agreement dated October 12, 1995 between
the Carpenters' Benefit Fund Dental Plan and Edward B. Basner.
Withdrawal from the Agreement must be made in writing within 30
days notice.
17. Dental Care Agreement dated October 12, 1995 between
the Carpenters' Benefit Fund Dental Plan and Jonathan Nash.
Withdrawal from the Agreement must be made in writing within 30
days notice of termination.
18. Dental Care Agreement dated September 13, 1994
between Dr. David G. Parker, Dr. Joel Clyman, Dr. Jonathan Nash,
and Dr. Edward Basner and the Carpenters Health and Welfare
Fund. Withdrawal from the Agreement must be made in writing
within 30 days notice of termination.
19. Agreement and Amendment dated September 6, 1994
between Blue Cross and Blue Shield of New Jersey, Inc. and Dr.
Edward Basner. May be cancelled by giving 30 days notice.
<PAGE> 40
20. Agreement and Amendment dated September 6, 1994
between Blue Cross and Blue Shield of New Jersey, Inc. and
Jonathan Nash. May be cancelled by giving 30 days notice.
21. Agreement and Amendment dated September 6, 1994
between Blue Cross and Blue Shield of New Jersey, Inc. and Barry
Gillespie.
12. Business Locations.
(a) 400 South State Road, Springfield, PA
<PAGE> 41
EXHIBIT C
FINANCIAL STATEMENTS
See attached.
<PAGE> 42
EXHIBIT D
CERTAIN EMPLOYEES OF THE BUSINESS
1. Employees and Independent Contractors of the Business earning in
excess of $35,000 per year:
<TABLE>
<CAPTION>
Annual Salary/
Employee Name Employee Type Date of Hire Compensation
------------- ------------- ------------ --------------
<S> <C> <C> <C>
Jonathan Nash, D.D.S. Dentist 6/96 30% of collections
plus $18,000 Quality
Control Services
plus 20% of
quarterly operating
profits up to
$30,000 and 25% of
quarterly operating
profits greater than
$30,000*
Richard P. Kaufman, D.M.D. Dentist 8/9/95 20% of Net Production
Edward B. Basner, D.D.S. Dentist 7/18/89 20% of Gross
Production or
$25/hour which ever
is greater
Dr. James Robbins Oral Surgeon 40% of Net Production
Dr. Ed Gillespie Periodontist 4/1/93 60% of TMJ production
50% of periodontal
net production
*Bonus is disputed by the Seller
</TABLE>
2. Increases in compensation since March 31, 1997:
See attached.
3. Agreements between the Business and employees.
None.
4. Employees entitled to more than three weeks vacation during the
current calendar year:
See attached.
<PAGE> 43
5. Bonuses granted to employees which have not yet been paid in full:
None.
6. Terminated Employees:
None.
<PAGE> 44
EXHIBIT E
EMPLOYEE BENEFIT PLANS
1. Princeton Dental Management Corporation 401(K) Plan (Plan #001)
(effective 7/1/94)
2. Princeton Dental Management Corporation Employee Benefit Plan (Group
Health Plan)
<PAGE> 45
EXHIBIT F
INTELLECTUAL PROPERTY RIGHTS
1. The name "Century Dental".
<PAGE> 46
EXHIBIT G
BANK ACCOUNTS
<TABLE>
<CAPTION> Persons with
Bank Account No. Type of Account Signature Authority
- ---------------- ------------ ----------------- -------------------
<S> <C> <C> <C>
PNC Bank 86-1017-9833 Business Checking Jonathan Nash, D.D.S.,
Beverly Militello and
Ray Hlavacs
Mellon Bank NA 2-136-844 Business Checking
First of America 43-3006234-2 Business Checking Jonathan Nash, D.D.S.,
Patricia Scharff
and Ray Hlavacs
</TABLE>
<PAGE> 1
EXHIBIT 10.54
May 30, 1997
Mr. Lawrence Ceraulo
Certex Dental Studio
2001 N. State Road 7
No. A1
Margate, FL 33063
Re: MASON DENTAL SOUTHEAST, INC. ("MASON SOUTHEAST")
RENAISSANCE DENTAL STUDIO ("RENAISSANCE")
Dear Mr. Ceraulo:
The following represents the terms and conditions upon which, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, (i) Mason Southeast will sell all of the assets of Mason
Southeast to Mr. Lawrence Ceraulo d/b/a Certex Dental Studio (collectively,
"Certex"), and (ii) Certex will assume any and all rights and obligations
regarding Renaissance from Mason Dental Midwest, Inc. ("Mason Midwest").
1. Mason Southeast Assets. All tangible and intangible assets
of Mason Southeast presently located at the Mason Southeast laboratory facility
including, but not limited to, equipment, supplies, inventory, customer lists,
records, insurance contracts, employment agreements, furniture and fixtures,
all as a going concern ("Mason Southeast Assets"), will be sold to Certex by
Mason Southeast in accordance with the terms and conditions contained in this
agreement. All of the Mason Southeast Assets shall be sold free and clear of
all liens, claims and encumbrances. The parties agree and acknowledge that the
Mason Southeast Assets will not include: (i) cash on hand at closing, (ii)
accounts receivable outstanding as of the date of closing, (iii) M&J deposit in
the amount of $10,000.00, (iii) that certain Ford Escort automobile presently
owned by Mason Southeast, (iv) prepaid insurance in the amount of $2,712.00,
and (v) any and all assets associated with Renaissance, which are being
transferred as specified in Paragraph 3 hereof.
2. Mason Southeast Liabilities. Mason Southeast is being sold to
Certex as an ongoing business, and it is anticipated that, except as specified
herein, Certex is assuming any ongoing liabilities of Mason Southeast.
Provided, however, that Certex is specifically not assuming the following
liabilities: (i) outstanding Mason Southeast accounts payable incurred prior to
the closing date, and (ii) that certain FMC Note in the amount of $8,010.00.
3. Renaissance Assignment and Assumption. Mason Midwest shall assign to
Certex, and Certex would assume, any and all rights and ongoing obligations
relating to Renaissance including, without limitation, those outlined in (i)
Agreement of Purchase and Sale dated as of August 29, 1996 between Gerald
L. Kunze ("Kunze") and Mason Midwest, (ii) Employment Agreement dated as of
September 5, 1996 betweens Kunze and Mason Midwest, (iii) Security Agreement
dated as of September 5, 1996 between Kunze and Mason Midwest, and (iv)
<PAGE> 2
Promissory Note in the initial principal amount of $21,626.76 executed by Mason
Midwest in favor of Kunze and dated September 5, 1996 (collectively, the
"Renaissance Agreements").
4. Purchase Price. The purchase price for the Mason Southeast Assets
would be $92,096.00, increased by the agreed value of the supplies being
transferred, payable in readily available bank funds at closing; provided,
however, that at the sole option of Mason Southeast, Mason Southeast may
elect to allow Certex to pay the full amount of the purchase price in the form
of a Forty-Five (45) day secured note in form and substance acceptable to Mason
Southeast. The purchase price with respect to Renaissance would be the
assumption of the Promissory Note included within the Renaissance Agreements.
5. Accounts Receivable. Mason Southeast and Renaissance accounts
receivable for work/services rendered in the ordinary course of business prior
to the date of closing would be the property of, and would accrue to the
benefit of, Mason Southeast. Mason Southeast and Renaissance accounts
receivable for work/services rendered in the ordinary course of business after
the date of closing would be the property of, and would accrue to the benefit
of, Certex.
6. Work in Progress. Mason Southeast and Renaissance work in progress
created in the ordinary course of business prior to the date of closing would
be the property of, and would accrue to the benefit of, Mason Southeast.
7. Liabilities. Mason Southeast and Renaissance accounts payable
incurred in the ordinary course of business prior to the date of closing would
be the responsibility of Mason Southeast. Any and all liabilities incurred
post-closing in connection with the ongoing operation of Mason Southeast and
Renaissance including, without limitation, the employment and payment of
benefits (including, without limitation, any accrued vacation time) to the
individuals listed on Exhibit A attached hereto and incorporated herein
(collectively, the "Mason Southeast and Renaissance Employees"), shall be
solely Certex's responsibility.
<PAGE> 3
8. Ongoing Contractual Relationship. Certex agrees that, for a period of
three (3) years from the closing date, it shall, at the sole option of the
Florida Dental Team, P.A., continue to provide dental laboratory services as
may be required to members of The Florida Dental Team, P.A. at the same price
and on the same terms as are presently provided by Mason Southeast and/or
Renaissance to The Florida Dental Team, P.A. The parties acknowledge that it is
essential that Certex be able to meet all volume and quality requirements of
The Florida Dental Team, P.A., and Certex represents and warrants that Certex
will be able to meet or exceed such requirements. The parties further
acknowledge that this agreement was an essential inducement for Mason Southeast
to enter into this agreement with Certex, and the parties agree that Mason
Southeast, and/or The Florida Dental Team, P.A., shall be entitled to
injunctive relief, in addition to any suit for damages, in the event that
Certex violates this agreement.
9. Certain Taxes. Mason Southeast would pay current as of the date of
closing, all state and federal payroll taxes relating to Mason Southeast and
Renaissance, including but not limited to, Medicare, unemployment, and Social
Security on the Mason Southeast and Renaissance Employees.
In addition, both parties acknowledge that it may be necessary for a
consolidated income tax return to be filed regarding Mason Southeast for the
year in which the closing occurs, and both parties agree to cooperate in this
regard.
10. Fringe Benefits; Insurance. Mason Southeast would pay current
through the date of closing (i) all accrued but unpaid 401(k) deposits for all
the Mason Southeast and Renaissance Employees, (ii) all health insurance
premiums for all of the Mason Southeast and Renaissance Employees, (iii) all
payments due to third party health care providers regarding the Mason Southeast
and Renaissance Employees, and (iv) all insurance premiums for worker's
compensation insurance (if any) relating to the Mason Southeast and Renaissance
Employees.
11. Building Leases. All amounts due under the building leases
currently in existence for Mason Southeast and Renaissance would be paid
current through the date of closing. The parties acknowledge that, at present,
no amounts are due from Mason Southeast in this regard other than currently
pending monthly lease payments. Post closing, all responsibilities under such
leases would be the sole responsibility of Certex. The parties agree to use
their very best efforts to obtain the consent of the landlord for the
assignment and assumption of that certain Lease Agreement dated February 26,
1993 regarding the Pompano Square Dental Lab location; provided, however, that,
in the event that such consent is delayed or otherwise not obtained, the
parties shall enter into a pass-through arrangement whereby Certex shall be
solely responsible for any and all obligations pursuant to such Lease
Agreement.
12. Record Keeping. Certex would agree to maintain in the ordinary
course of business all prior business records of Mason Southeast and
Renaissance and to provide reasonable access to such records to Mason Southeast
and Mason Southeast's agents.
13. Closing Date. The closing date for the transactions set forth in
this letter agreement shall be as of June 1, 1997.
<PAGE> 4
14. Documentation. This Agreement is entirely subject to the approval of
the Board of Directors of Mason Southeast and Mason Midwest, but otherwise
constitutes a legally binding obligation on the parties hereto without the need
for any additional documentation; provided, however, that the parties mutually
agree to enter into any other documentation which may be deemed reasonably
necessary by counsel solely in order to properly effectuate the transactions
contemplated herein. All parties shall bear their own costs in this regard,
including those of legal counsel.
If these terms are acceptable to you, please indicate your acceptance by
initialling each page, signing this letter below and returning it to us via
telecopy and overnight mail. This letter agreement may be signed in individual
counterparts, each of which together shall constitute a legal, valid and
binding agreement among the parties.
Sincerely,
MASON DENTAL SOUTHEAST, INC.
___________________________
Gary A. Lockwood, President
MASON DENTAL MIDWEST, INC.
___________________________
Gary A. Lockwood, President
AGREED AND ACCEPTED:
_______________________________
Lawrence Ceraulo, individually
and d/b/a Certex Dental Studio
<PAGE> 1
EXHIBIT 10.55
MODIFICATION AGREEMENT
This Modification Agreement ("Agreement") is entered into as of July 1,
1997 by and among Amsterdam Equities Limited ("Amsterdam"), Frank Leonard
Laport ("Laport"), Beverly Trust Company, as Custodian of the Frank Leonard
Laport Rollover IRA #75-49990 ("Laport IRA", and, collectively with Amsterdam
and Laport, the "Investor Group"), and Princeton Dental Management Corporation
("PDMC").
WHEREAS, Amsterdam and PDMC have previously entered into that certain
Convertible Debt Agreement dated as of April 22, 1996 ("Convertible Debt
Agreement"), pursuant to which PDMC delivered to Amsterdam that certain
$13,050,000 Convertible Secured Note ("Convertible Note"), and that certain
Warrant to Purchase up to 3,588,750 shares of common stock of PDMC ("Amsterdam
Default Warrant").
WHEREAS, Amsterdam, Laport, Laport IRA and PDMC have previously entered
into that certain Series A 11.75% Cumulative Convertible Preferred Stock
Purchase Agreement dated as of April 22, 1996 ("Series A Agreement"), pursuant
to which PDMC delivered to Laport that certain Warrant to Purchase up to
134,063 shares of common stock of PDMC ("Laport Default Warrant"), and pursuant
to which PDMC delivered to Laport IRA that certain Warrant to Purchase up to
134,062 shares of common stock of PDMC ("Laport IRA Default Warrant"), and
pursuant to which PDMC delivered to Amsterdam that certain Warrant to Purchase
up to 268,125 shares of common stock of PDMC ("Amsterdam Series A Default
Warrant").
WHEREAS, PDMC has been advised by The Nasdaq Stock Market, Inc. that PDMC
does not currently meet the listing standards required for continued listing on
the Nasdaq SmallCap Market ("Nasdaq SmallCap").
WHEREAS, PDMC has advised the Investor Group that, in an effort to meet
the listing requirements of the Nasdaq SmallCap and remain listed on the Nasdaq
SmallCap, PDMC is requesting that the Investor Group agree to certain
modifications of the Convertible Debt Agreement, the Convertible Debt Note and
the Series A Agreement.
WHEREAS, PDMC acknowledges that the Convertible Debt Agreement, the
Convertible Debt Note and the Series A Agreement are each currently in a state
of default, and any and all amounts due and owing under such agreements are due
upon demand.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Convertible Debt Agreement. Amsterdam agrees to waive any and all
accrued and ongoing interest payments as may be due to Amsterdam pursuant to
the Convertible Debt Agreement and/or the Convertible Debt Note for the period
from January 1, 1997 through December 31, 1997 (the "Waiver Period"). Amsterdam
agrees that interest will not accrue during the Waiver Period and that interest
will not begin to accrue until January 1, 1998, at which point interest will
again begin to accrue in strict accordance with the terms of the Convertible
Debt Agreement. Provided, however, that the parties acknowledge that this
Agreement is being entered into, in part, in consideration of (i) a waiver of
any accrued and
<PAGE> 2
ongoing interest as may be due for the period from July 1, 1997 though June 30,
1998 pursuant to that certain Acquisition Promissory Note in the initial
principal amount of $1,350,000 executed by PDMC in favor of the constituent
shareholders of Mason Dental, Inc. and dated as of December 31, 1993 ("Island
Group Waiver"), and (ii) the continued listing of PDMC on the Nasdaq SmallCap
Market ("Nasdaq Listing"), and, in the event that either the Island Group
Waiver or the Nasdaq Listing terminate for any reason whatsoever during the
Waiver Period, then, in such event, Amsterdam may, at its sole and exclusive
option, immediately deem this Modification Agreement void ab initio and of no
force and effect.
2. Series A Agreement. The Investor Group, and each of them, agree to
waive any and all accrued and ongoing dividend payments as may be due to any of
the Investor Group pursuant to the Series A Agreement for the Waiver Period.
The Investor Group, and each of them, agree that dividend payments will not
accrue during the Waiver Period and that dividend payments will not begin to
accrue until January 1, 1998, at which point dividend payments will again begin
to accrue in strict accordance with the terms of the Series A Agreement.
Provided, however, that the parties acknowledge that this Agreement is being
entered into, in part, in consideration of (i) the Island Group Waiver, and
(ii) the Nasdaq Listing, and, in the event that either the Island Group Waiver
or the Nasdaq Listing terminate for any reason whatsoever during the Waiver
Period, then, in such event, the Investor Group, or any of them, may, at their
sole and exclusive option, immediately deem this Modification Agreement void ab
initio and of no force and effect.
3. Default Warrants. PDMC agrees and acknowledges that each of the
Amsterdam Default Warrant, the Amsterdam Series A Default Warrant, the Laport
Default Warrant and the Laport IRA Default Warrant (collectively, the "Default
Warrants") has been effective since January 1, 1997 and that no further action
whatsoever is required in order to render the Default Warrants, or any of them,
effective. PDMC further agrees that, effective immediately and without need for
further action, the "Exercise Price", as such term is defined in each of the
Default Warrants, is reduced from Ten United States Cents ($0.10) per Share (as
such term is defined in the Default Warrants) to One United States Cent ($0.01)
per Share. The parties agree and acknowledge that this reduction in the
Exercise Price of the Default Warrants was an absolute precondition of the
waiver of interest and dividends on the part of the Investor Group, and that
the Investor Group would in no event have agreed to any such waiver without
such a reduction.
Consistent with the terms of Section 8 of each of the Default Warrants,
PDMC also agrees and reaffirms that it shall be solely liable for any and all
United States, state, local or any other taxes as may be due and owing as a
result of or in any way connected to (i) the issuance of the Default Warrants,
or any of them, (ii) the exercise of the Default Warrants, or any of them,
and/or (iii) the reduction in the Exercise Price of each of the Default
Warrants, or any of them, pursuant to this Agreement.
Except to the extent and as specifically modified by this Agreement, the
Convertible Debt Agreement, the Convertible Note, the Series A Agreement, the
Default Warrants and any and all other documents entered into in connection
with such documents (the "Investor Group
<PAGE> 3
Documents") remain unchanged and are hereby ratified and reaffirmed in their
entirety. Except as specifically set forth in this Agreement, the terms which
are used in this Agreement shall have the meanings given to them in the
Investor Group Documents and the terms and conditions of the Investor Group
Documents are incorporated into this Agreement in their entirety.
The parties hereto agree that no further action is required in order to
effectuate the agreements set forth in this Agreement, but, in the event that
counsel for the Investor Group or PDMC reasonably determines that any such
additional documentation is required in order to properly effectuate such
agreements, each of the parties agree to cooperate in this regard and to
immediately execute any additional required documentation.
This Agreement may be executed in counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the
same agreement.
[END OF TEXT ON THIS PAGE]
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have entered into this Modification
Agreement effective as of July 1, 1997.
AMSTERDAM EQUITIES LIMITED
By: _____________________
Its: ____________________
___________________________
Frank Leonard Laport
BEVERLY TRUST COMPANY, as
Custodian of the Frank
Leonard Laport Rollover
IRA #75-49990
By: _______________________________
Its: ______________________________
PRINCETON DENTAL MANAGEMENT CORPORATION
By: _______________________________
Its: ______________________________
<PAGE> 1
EXHIBIT 10.56
ALLONGE AND FOURTH AMENDMENT TO ACQUISITION
PROMISSORY NOTE
This Allonge and Fourth Amendment to Acquisition Promissory Note
("Amendment") is made effective as of the 1st day of July, 1997 between
Princeton Dental Management Corporation, a Delaware corporation ("PDMC"), Mason
Dental Midwest, Inc. ("Mason") (PDMC and Mason are hereinafter collectively
referred to as the "Maker"), and the Constituent Shareholders of the Delaware
corporation formerly known as Mason Dental, Inc. (the Constituent Shareholders
are collectively referred to as the "Holder").
RECITALS
A. Maker has previously executed in favor of Holder that certain
Acquisition Promissory Note dated December 31, 1993 in the initial principal
amount of $1,350,000.00, as subsequently amended ("Acquisition Promissory
Note").
B. Maker and Holder desire to further amend the Acquisition Promissory
Note to reflect certain agreements reached by Maker and Holder.
AGREEMENTS
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Unless otherwise defined herein, all capitalized terms used
herein which are defined in the Acquisition Promissory Note shall have the
meanings assigned to them in the Acquisition Promissory Note.
2. The following new Section 20 shall be added to the Acquisition
Promissory Note:
"20. Principal-Only Payments/Waiver of Interest.
Notwithstanding anything contained in this Note to the contrary, the Maker
shall be required to make payments of principal only for the period from July
1, 1997 through June 30, 1998 (the "Waiver Period"). Interest payments
shall be waived during the Waiver Period and interest shall not accrue during
the Waiver Period. Provided, however, that the parties acknowledge that this
Amendment is being entered into, in part, in consideration of (i) a waiver,
subject to certain terms and conditions, of accrued and ongoing interest by
Amsterdam Equities Limited and Frank Leonard Laport (and certain entities
related to Mr. Laport) for the period from January 1, 1997 through December 31,
1997 ("Group Interest Waiver"), and (ii) the continued listing of Princeton
Dental Management Corporation on the Nasdaq SmallCap Market ("Nasdaq Listing"),
and, in the event that either the Group Interest Waiver or the Nasdaq Listing
fail to occur, than, in such event, the Holder may, upon thirty (30) days
written notice to the Maker, declare this Amendment terminated effective as of
the effective date of such notice."
Except as specifically amended by this Amendment, the Acquisition
Promissory Note shall remain in full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the parties have executed this Allonge and Fourth
Amendment to Acquisition Promissory Note as of the date first written above.
PRINCETON DENTAL MANAGEMENT CORPORATION
By:___________________________________
Frank Leonard Laport, CEO
MASON DENTAL MIDWEST, INC.
By:___________________________________
Gary Lockwood, President
CONSTITUENT SHAREHOLDERS
By: ______________________
Their: Authorized Representative
<PAGE> 3
STATE OF MICHIGAN)
COUNTY OF _____ )
I, ________________________, a Notary Public in and for the County and
State aforesaid, DO HEREBY CERTIFY that Gary Lockwood, personally known to me
to be the President of Mason Dental Midwest, Inc., appeared before me this day
in person and acknowledged that as such officer he signed and delivered such
instrument as his free and voluntary act and with due authorization, and as the
free and voluntary act of the Company, for the uses and purposes therein set
forth.
Given under my hand and seal this ___ day of July, 1997.
________________________
NOTARY PUBLIC
My Commission expires __________.
STATE OF ILLINOIS)
COUNTY OF COOK )
I, ______________________, a Notary Public in and for the County and State
aforesaid, DO HEREBY CERTIFY that Frank Leonard Laport, personally known to me
to be the Chairman of the Board and CEO of Princeton Dental Management
Corporation, appeared before me this day in person and acknowledged that he
signed and delivered such instrument as his free and voluntary act and with due
authorization, and as the free and voluntary act of the Company, for the uses
and purposes therein set forth.
Given under my hand and seal this ___ day of July, 1997.
________________________
NOTARY PUBLIC
My Commission expires __________.
<PAGE> 4
STATE OF MICHIGAN)
COUNTY OF _____ )
I, ________________________, a Notary Public in and for the County and
State aforesaid, DO HEREBY CERTIFY that _____________, personally known to me
to be one of the Constituent Shareholders, appeared before me this day in
person and acknowledged that as such officer he signed and delivered such
instrument as his free and voluntary act and with due authorization, and as the
free and voluntary act and with due authorization of a majority in interest of
the Constituent Shareholders, for the uses and purposes therein set forth.
Given under my hand and seal this ___ day of July, 1997.
________________________
NOTARY PUBLIC
My Commission expires __________.
<PAGE> 1
EXHIBIT 10.57
NOTE AND LOAN AGREEMENT
Bridgeview, Illinois Date: As of July 15, 1997
FOR VALUE RECEIVED the undersigned, Lawrence Ceraulo and Victor Texidor,
and Certex Dental Studio, Inc. (the "Makers") promise to pay to the order of
Mason Dental Southeast, Inc., together with any successors or assigns (the
"Holder"), at 7421 W. 100th Place, Bridgeview, Illinois 60455-2442 or such
other place as Holder may designate from time to time hereafter (hereinafter
referred to as the "Location"), the principal sum of Ninety-Six Thousand Three
Hundred Fifty-Seven and 38/100 Dollars ($96,357.38) - hereinafter referred to
as the "Principal Obligation".
The Principal Obligation unpaid from time to time shall bear interest from
July 15, 1997 until paid, computed at a daily rate equal to the daily rate
equivalent of Fourteen and three-quarters percent (14.75%) per annum
(hereinafter referred to as the "Stated Rate") computed on the basis of a
360-day year and actual days elapsed, (the Principal Obligation and interest
due at the Stated Rate are hereinafter referred to as the "Makers Primary
Indebtedness"). Makers' Primary Indebtedness shall be payable in accordance
with the amortization schedule attached hereto as Exhibit A, which has been
initiated by the Makers and is incorporated herein and made a part hereof. All
payments on account of Makers Primary Indebtedness shall be applied first to
accrued and unpaid interest and the remainder to principal. Each date that a
payment is due hereunder, as is set forth on Exhibit A, is hereinafter referred
to as the "Due Date". Any accrued but unpaid principal and interest still due
and owing shall be paid in full on July 14, 1998. If this Note, or any
obligation hereunder, is not paid to the Holder when due, then the Principal
Obligation unpaid from time to time shall bear interest from the Due Date until
paid at the highest interest rate permitted by law on the Due Date (hereinafter
referred to as the "Adjusted Stated Rate"). The foregoing notwithstanding, the
Adjusted Stated Rate shall be capped at a rate of ten percent (10%) over the
Stated Rate; and, if by operation of the immediately preceding sentence, the
Adjusted Stated Rate exceeds a rate of ten percent (10%) over the Stated Rate,
the Adjusted Stated Rate shall be reduced to a rate equal to ten percent (10%)
over the Stated Rate. The Makers' Primary Indebtedness and interest due at the
Adjusted Stated Rate is hereinafter referred to as "Makers' Secondary
Obligation".
Interest shall be payable by Makers to Holder with the Principal
Obligation of Makers' Primary Indebtedness, as applicable by the terms hereof,
or as billed by Holder to Makers, at the Location.
To secure this Note, the Makers hereby grant to the Holder a security
interest in all of the assets, inventory, accounts receivable and accounts of
the Makers and any sole proprietorship, partnership, corporation and other
entity in which and to the extent of which they have an interest therein and
their affiliates, whether now owned or hereafter acquired, and all immediate
and remote proceeds thereof. Such security interest shall only be subject to
presently existing, secured debt of the Makers. The Makers agree to
immediately take all necessary actions, and to execute any necessary filings,
to secure such security interest, and to provide the Holder with proof thereof.
The Makers hereby acknowledge that they have
<PAGE> 2
induced the Holder to accept this Note by their specific representation to the
Holder that they, neither individually or collectively, shall ever cause the
security by which this Note is to be secured, currently and in the future, to
be impaired in any way including, by way of illustration and not limitation, by
sale, assignment, concealment, removal and /or otherwise. Should the security
by which this Note is to be secure, currently and in the future, become
impaired, the Makers agree that such impairment shall constitute an Event of
Default, hereinafter defined.
Makers warrant and represent to Holder that the debt represented by this
Note was incurred solely for proper business purposes, and consistently with
all applicable laws and statutes.
The occurrence of any one of the following events shall constitute and
default by Makers (hereinafter referred to as the "Event of Default") under
this Note: (a) if Makers fail to pay Makers' Primary Indebtedness when due and
payable; or (b) if Makers fail to perform, keep or observe any term, provision,
condition, covenant, warranty or representation contained in the Note which is
required to be performed, kept or observed by Makers.
The Holder shall be entitled to receive payment in full of all interest
accruing hereon subsequent to the filing of a petition or the taking of any
other action commencing a bankruptcy or other similar proceeding or which would
accrue but for such proceeding or action of the under signed.
Upon an Event of Default hereunder, without notice by Holder to or demand
by Holder of Makers, subject to the Holder's sole and absolute election, all of
Makers' Primary Indebtedness shall be due and payable forthwith hereunder and
all remedies, including the remedies provided herein and any others by law and
equity, shall be available to the Holder. The acceptance by Holder of any
partial payment make hereunder after the time when any of Makers' Primary
Indebtedness become due and payable will not establish a custom, or waive any
rights of Holder to enforce prompt payment hereof: presentment, protest,
default, non0peyment, maturity, release, compromise, settlement, extension,
renewal of this Note and all other notices except as herein specifically
provided.
Makers agree to pay, upon Holder's demand therefor, any and all costs,
fees and expenses (including, solely by the way of illustration and not
limitation, attorneys' fees, costs and expenses) incurred in enforcing any of
Holder's rights, hereunder, and to the extent not paid the same shall become
part of Makers' Primary Indebtedness hereunder.
Makers hereby authorize, irrevocably, any attorney of any Court of Record
in any state or territory of the United States where the same is allowed by
law, in term time or vacation, at any time after occurrence of an Event of
Default hereunder, to appear for Makers, to waive the issuance and service of
process, and confess a judgement against the Makers for the amount of Makers'
Secondary Obligation due hereunder, including all casts, fees and expenses as
provided herein, further authorizing said attorney to waive and release all
errors which may intervene in any such proceeding and waive all right of appeal
and consent to immediate execution upon such judgement, hereby agreeing that no
writ of error or appeal will be prosecuted from such judgement, nor any bill in
equity filed to retrain the operation of said judgment, or any execution
thereon, and hereby ratifying and confirming all that said attorney may do by
virtue hereof. If this provision or any other provision of this Note or the
application thereof to any party or circumstance is held invalid or
unenforceable, the remainder of this
<PAGE> 3
Note and the application thereof to other parties or circumstances shall not be
affected thereby, the provisions of this Note being severable in any
such instance.
This Note is submitted by the undersigned to the Holder at the Location by
Priority Mail United States Postal Service and the undersigned and Holder
agrees that this Note shall be deemed to have been made and delivered thereat.
The undersigned and Holder agree that this Note shall be governed and
controlled by the laws of the State of Illinois as to interpretation,
enforcement, validity, construction, effect, choice of law and in all other
respects.
To induce Holder to accept this Note, Makers irrevocably agree that,
subject to Holder's sole and absolute election, all actions or proceedings in
any way, manner or respect, arising out of or from or related to this Note
shall be litigated in courts having situs within the County of Cook, State of
Illinois. Makers hereby consent and submit to the jurisdiction of any local,
state or federal court located within said county and state.
If this Note is signed by (1) more than one individual person, or (2) more
than one corporation and/or entity, or (3) one or more individual persons and
one or more than one corporation and/or business entity, then, in such
instance, said signatories shall be liable jointly and severally hereunder; but
the words "jointly" and severally" as used in this Note shall be disregarded in
the case it is signed by only one corporation or by only one individual person.
Any notice, designation, demand, consent or request required herein to be
given to or to be served upon Makers by Holder shall be in writing, be given or
served by Holder and be deemed to have been given or served: (1) upon mailing,
if addressed to Makers at 4100 N. Powerline Road, Suite F, Pompano Beach, FL
33060 and sent by certified mail, postage prepaid with return receipt
requested, or (2) upon acceptance by United Parcel Service, Federal Express or
another courier service or a messenger service, if addressed to Makers at 4100
N. Powerline Road, Suite F, Pompano Beach, FL 33060, and sent to Makers by
United Parcel Service, Federal Express or another courier service or a
messenger service; or (3) upon receipt by or for Makers if sent otherwise. Any
notice, designation, demand, consent, request or communication required herein
to be given to or to be served or otherwise given or served in relation to this
Note upon Holder by Makers shall be in writing, be given or served by Makers
and be deemed to have been given or deserved upon actual receipt by Holder and
shall be evidenced by a signed acknowledgement of receipt of the same by
Holder.
MAKERS:
- -------------------------------- -------------------------------
Lawrence Ceraulo Victor Texidor
CERTEX DENTAL STUDIO, INC. BY:
- -------------------------------- -------------------------------
Victor Texidor, President Lawrence Ceraulo, Secretary
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