SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 31, 1997
--------------
GENTLE DENTAL SERVICE CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Washington 333-13529 91-1577891
- ----------------------- ----------------- -------------------
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification No.)
incorporation or
organization)
900 Washington Street, Suite 1100, Vancouver, WA 98660
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(360) 750-7975
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
No Change
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On March 31, 1997, Gentle Dental Service Corporation (the "Company")
completed the acquisition of substantially all of the assets of Blue Oak Dental
Group ("Blue Oak"), a six-dentist group practice located in the Sacramento,
California area. According to information supplied by Blue Oak to the Company,
Blue Oak had patient revenues of $2.9 million in 1996. The purchase price paid
at closing for Blue Oak's assets consisted of $775,000 in cash, 109,039 shares
of Company Common Stock (valued at $475,000), and two subordinated promissory
notes in the aggregate principal amount of $301,774 (one note for $174,597 with
an interest rate of prime plus 2%, level payments of principal and interest and
a maturity date of December 31, 2002, and the other note for $127,177 with an
interest rate of prime plus 1%, level payments of principal and interest and a
maturity date of October 31, 2001). In addition, the Company assumed long-term
liabilities of $248,226 and agreed to issue up to an additional 160,689 shares
of Company Common Stock (valued at $700,000) if certain earnings targets are met
by the acquired practice during the year following the acquisition. The cash
paid at closing was obtained from the proceeds of the Company's February 1997
initial public offering.
In connection with the Blue Oak acquisition, the Company entered into a
Support Services Agreement with a newly-formed professional corporation (the
"New PC") which now employs the former Blue Oak dentists and will provide dental
services to the patients of the acquired practice. The Support Services
Agreement has a term of 40 years and provides for service fees payable to the
Company equal to 53% of the New PC's net revenue in 1997 and increasing to 54%
of the New PC's net revenue in 1998 and 55% of the New PC's net revenue in 1999
and thereafter.
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired. Financial statements of
Blue Oak are not filed because, based on a comparison of the 1996
financial statements of the Company and Blue Oak, none of the
conditions specified in Item 310(c)(2) of Regulation S-B exceeds 20
percent.
(b) Pro forma financial information. Pro forma financial information is
not filed because, based on a comparison of the 1996 financial
statements of the Company and Blue Oak, none of the conditions
specified in Item 310(c)(2) of Regulation S-B exceeds 20 percent.
(c) Exhibits.
2.1 Asset Purchase Agreement, dated as of March 31, 1997, between the
Company, Blue Oak Dental Group, Mark E. Arena, D.D.S., Robert H.
Gade, Jr., D.D.S., Michael D. Gade, D.D.S., and A. Randel Wilkes,
D.D.S.
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: April 14, 1997
GENTLE DENTAL SERVICE CORPORATION
By L. THEODORE VAN EERDEN
-------------------------------------------
L. Theodore Van Eerden,
Chief Financial Officer
3
<PAGE>
EXHIBIT INDEX
Exhibit Description
- ------- -----------
2.1 Asset Purchase Agreement, dated as of March 31, 1997, between the
Company, Blue Oak Dental Group, Mark E. Arena, D.D.S., Robert H. Gade,
Jr., D.D.S., Michael D. Gade, D.D.S., and A. Randel Wilkes, D.D.S.
The following exhibits and schedules to the Asset Purchase Agreement
have been omitted and will be provided to the Securities and Exchange
Commission upon request:
Exhibit A Assumption Agreement
Exhibit A-1 Note to A. Hollis Field, Inc.
Exhibit A-2 Note to Blue Oak ($174,597)
Exhibit A-3 Note to Blue Oak ($127,177)
Exhibit B Assignment and Bill of Sale
Exhibit C Assignment to Professional Corporation
Exhibit D Support Services Agreement
Exhibit E Assignable Option Agreement
Exhibit F Employment Agreement
Exhibit G Addendum to Employment Agreement
Exhibit H Opinion of Blue Oak's Counsel
Exhibit I Opinion of Company Counsel
Schedule 1.02-2 Excluded Assets
Schedule 1.10 Purchase Price Allocation
Schedule 4.04 Litigation
Schedule 4.06-2 Employee Benefits
Schedule 4.06-3 Employment Manuals and Policies
Schedule 4.06-4 Compensation
Schedule 4.07 Financial Statements
Schedule 4.08 Receivables
Schedule 4.09 Prepaid Expenses and Other
Schedule 4.10 Tangible Personal Property
Schedule 4.11 Payables
Schedule 4.12 Indebtedness
Schedule 4.13 Other Liabilities
Schedule 4.15 Leases
Schedule 4.16 Contracts
Schedule 4.19 Insurance
Schedule 4.25 Consents and Approvals
ASSET PURCHASE AGREEMENT
between
GENTLE DENTAL SERVICE CORPORATION
and
BLUE OAK DENTAL GROUP
Dated March 31, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I Purchase and Sale of Assets..................................... 1
1.01 Purchase and Sale...................................... 1
1.02 Excluded Assets........................................ 3
1.03 Assumption of Liabilities.............................. 3
1.04 Purchase Price......................................... 3
1.05 Escrow Shares.......................................... 5
1.06 Instruments of Conveyance and Transfer................. 5
1.07 Further Assurances..................................... 5
1.08 Closing................................................ 6
1.09 Sales Tax.............................................. 6
1.10 Allocation of Purchase Price........................... 6
ARTICLE II Representations and Warranties of GDSC.......................... 6
2.01 Authorization.......................................... 6
2.02 Capitalization......................................... 6
2.03 Compliance............................................. 7
2.04 Consents............................................... 7
2.05 Accuracy of Representations & Warranties............... 7
2.06 Rule 144............................................... 7
ARTICLE III Individual Representations and Warranties of Partners........... 8
3.01 Authority.............................................. 8
3.02 Investment Representations............................. 8
3.03 Access to Information.................................. 8
3.04 Sophistication......................................... 8
ARTICLE IV Representations and Warranties of Blue Oak and the Partners..... 9
4.01 Organization; Authority................................ 9
4.02 No Adverse Consequences................................ 9
4.03 Brokers and Finders....................................10
4.04 Litigation.............................................10
4.05 Compliance with Laws...................................10
4.06 Employment Matters.....................................10
4.07 Financial Statements...................................11
4.08 Receivables............................................12
4.09 Prepaid Expenses and Other.............................12
4.10 Personal Property......................................12
i
<PAGE>
Page
----
4.11 Payables...............................................12
4.12 Indebtedness...........................................12
4.13 Other Liabilities......................................12
4.14 Absence of Certain Changes or Events...................12
4.15 Leases.................................................13
4.16 Certain Contracts and Arrangements.....................13
4.17 Status of Contracts and Leases.........................14
4.18 Title and Condition of Tangible Assets.................15
4.19 Insurance..............................................15
4.20 Taxes..................................................16
4.21 No Restrictions........................................16
4.22 Permits and Licenses...................................16
4.23 Certain Payments.......................................16
4.24 Environmental Conditions...............................16
4.25 Consents and Approvals.................................17
4.26 Records................................................17
4.27 Investment Representations.............................17
4.28 Reliance...............................................18
4.29 Accuracy of Representations and Warranties.............18
ARTICLE V Covenants of Blue Oak and the Partners..........................18
5.01 Access to Properties, Books and Records................18
5.02 Negative Covenants.....................................18
5.03 Affirmative Covenants..................................19
5.04 No Negotiations With Others............................20
5.05 Profit Sharing Plan....................................20
ARTICLE VI Joint Covenants.................................................21
6.01 Governmental Consents..................................21
6.02 Best Efforts; No Inconsistent Action...................21
ARTICLE VII Conditions to Obligations of GDSC...............................21
7.01 Governmental Approvals.................................21
7.02 Consents...............................................21
7.03 Representations, Warranties and Covenants..............21
7.04 Adverse Proceedings....................................22
7.05 No Adverse Change......................................22
7.06 Support Services Agreement.............................22
7.07 Option Agreement.......................................22
7.08 Employment Agreements..................................22
7.09 Opinion of Counsel.....................................22
ii
<PAGE>
Page
----
7.10 Actions Satisfactory to GDSC's Counsel.................22
ARTICLE VIII Conditions to Obligations of Blue Oak...........................23
8.01 Representations, Warranties and Covenants..............23
8.02 Adverse Proceedings....................................23
8.03 Opinion of Counsel.....................................23
8.04 Actions Satisfactory to Blue Oak's Counsel.............23
ARTICLE IX Termination ................................................23
9.01 Right of Parties to Terminate..........................23
9.02 Effect of Termination..................................24
ARTICLE X Survival; Indemnification.......................................24
10.01 Survival...............................................24
10.02 Indemnification by Blue Oak............................24
10.03 Indemnification by GDSC................................25
10.04 Indemnification Procedure..............................26
10.05 Rights Not Exclusive...................................27
ARTICLE XI Confidentiality; Press Releases.................................27
11.01 Confidentiality........................................27
11.02 Press Releases.........................................28
ARTICLE XII Other Provisions................................................28
12.01 Benefit and Assignment.................................28
12.02 Entire Agreement.......................................28
12.03 Fees and Expenses......................................28
12.04 Amendment, Waiver, etc.................................29
12.05 Headings...............................................29
12.06 Governing Law..........................................29
12.07 Notices................................................29
12.08 Breach; Equitable Relief...............................29
12.09 Attorneys' Fees........................................30
12.10 Counterparts...........................................30
iii
<PAGE>
INDEX OF DEFINED TERMS
Term Location of Definition
- ---- ----------------------
1933 Act...............................................1.04-2
Assets.................................................1.01
Assumed Liabilities....................................1.04-3
Blue Oak...............................................Introduction
Blue Oak's Indemnified Persons.........................10.03-1
Closing................................................1.08
Closing Date...........................................1.08
Code...................................................4.06-2
Contracts..............................................1.01-6
Current Balance Sheet..................................4.07-1
Damages................................................10.02-1
Dental Practice........................................Introduction
Earnout Amount.........................................1.04-4
Earnout Shares.........................................1.04-4
EBITDA.................................................1.04-4
ERISA..................................................4.06-2
ERISA Plans............................................4.06-2
Environmental Law......................................4.24-3(a)
Escrow Shares..........................................1.05-1
Financial Statements...................................4.07-1
Hazardous Substance....................................4.24-3(b)
Leases.................................................1.01-5
Material Adverse Change................................Article IV Introduction
Material Adverse Effect................................Article IV Introduction
GDSC...................................................Introduction
GDSC Common Stock......................................1.04-2
GDSC's Indemnified Persons.............................10.02-1
IPO....................................................1.04-2
Partners...............................................Introduction
Permits................................................4.22
Policies...............................................4.19
Professional Corporation...............................Introduction
Profit Sharing Plan....................................5.05
Purchase Price.........................................1.04
Real Property..........................................4.15
Registration Statement.................................1.04-2
Related Documents......................................10.01
Returns................................................4.20-1
Shares.................................................2.06
Stock Price............................................1.04-2
Tangible Personal Property.............................4.10
Taxes..................................................4.20-3
Third Party Claims.....................................10.04-1(a)
iv
<PAGE>
LIST OF EXHIBITS
Exhibit Item First Reference
- ------- ---- ---------------
A Assumption Agreement 1.04-3
A-1 Note to A. Hollis Field, Inc. 1.04-3(a)
A-2 Note to Blue Oak ($174,597) 1.04-5
A-3 Note to Blue Oak ($127,177) 1.04-5
B Assignment and Bill of Sale to GDSC 1.06
C Assignment to Professional Corporation 1.06
D Support Services Agreement 7.06
E Assignable Option Agreement 7.07
F Employment Agreement 7.08
G Addendum to Employment Agreement 7.08
H Opinion of Blue Oak's Counsel 7.09
I Opinion of GDSC's Counsel 8.03
LIST OF SCHEDULES
Schedule Content
- -------- -------
1.02-2 Excluded Assets
1.10 Purchase Price Allocation
4.04 Litigation
4.06-2 Employee Benefits
4.06-3 Employment Manuals and Policies
4.06-4 Compensation
4.07 Financial Statements
4.08 Receivables
4.09 Prepaid Expenses and Other
4.10 Tangible Personal Property
4.11 Payables
4.12 Indebtedness
4.13 Other Liabilities
4.15 Leases
4.16 Contracts
4.19 Insurance
4.25 Consents and Approvals
v
<PAGE>
ASSET PURCHASE AGREEMENT
DATED: March 31, 1997
BETWEEN: GENTLE DENTAL SERVICE CORPORATION,
a Washington corporation
900 Washington Street, Suite 1100
Vancouver, WA 98660
Telecopy No.: (360) 750-8667 "GDSC"
AND: BLUE OAK DENTAL GROUP,
a California general partnership
15 Sierra Gate Plaza
Roseville, CA 95678
Telecopy No.: (916) 783-0706 "Blue Oak"
AND: Mark E. Arena, D.D.S.
Robert H. Gade, Jr., D.D.S.
Michael D. Gade, D.D.S.
A. Randel Wilkes, D.D.S.
15 Sierra Gate Plaza
Roseville, CA 95678
Telecopy No.: (916) 783-0706 "Partners"
Blue Oak operates a dental practice at the address listed above (the
"Dental Practice"). Blue Oak desires to sell, and GDSC desires to purchase,
substantially all of the assets associated with the Dental Practice on the terms
and conditions set forth in this Agreement. After the completion of the
purchase, dental services will be provided to the patients of the Dental
Practice by Arena Dental Corporation, d.b.a. Blue Oak Dental Group, a Dental
Office of Dr. Mark Arena (the "Professional Corporation"), and each of the
Partners will become an employee of the Professional Corporation.
In consideration of the mutual promises and covenants contained in this
Agreement, the parties agree as follows:
ARTICLE I
Purchase and Sale of Assets
1.01 Purchase and Sale. Subject to all the terms and conditions of this
Agreement and for the consideration herein stated, on the "Closing Date," as
that term is defined in Section 1.08,
<PAGE>
Blue Oak agrees to sell, convey, assign, transfer and deliver to GDSC (or with
respect to certain assets as specified in Section 1.06, to the Professional
Corporation), and GDSC agrees to purchase and accept from Blue Oak, all of the
assets, properties and rights of Blue Oak (other than the assets specified in
Section 1.02), tangible and intangible, wherever located, that are used or
useful to maintain and operate the Dental Practice, which assets (the "Assets")
shall include without limitation:
1.01-1 All patient lists, charts, files and patient records, and all
other operating data and records relating to the Dental Practice, including
without limitation financial, accounting and credit records, correspondence,
budgets, engineering and facility records and other similar documents and
records;
1.01-2 All other items of tangible personal property of Blue Oak used
in connection with or associated with the Dental Practice, including furniture,
fixtures, equipment, supplies, inventory and spare and replacement items
therefor, including without limitation all such items listed on Schedule 4.10
and all such items acquired by Blue Oak after the date hereof and on or before
the Closing Date, other than to the extent such items are disposed of by Blue
Oak prior to the Closing Date without breach of this Agreement;
1.01-3 All accounts receivable and other receivables associated with
the Dental Practice, including without limitation all receivables listed on
Schedule 4.08 and all receivables acquired after February 28, 1997 and on or
before the Closing Date, other than to the extent such receivables have been
collected by Blue Oak prior to the Closing Date;
1.01-4 All prepaid and deferred items relating to the Dental Practice,
including prepaid rent, insurance, taxes and unbilled charges and deposits,
including without limitation all such items listed on Schedule 4.09;
1.01-5 All leases of real or personal property to which Blue Oak is a
party as lessee and which relate to the Dental Practice, including without
limitation all leases listed on Schedule 4.15 and all leases entered into after
the date hereof and on or before the Closing Date and expressly assumed by GDSC
in writing on the Closing Date as provided in Section 1.04-3(d), other than to
the extent such leases have terminated, expired or been disposed of by Blue Oak
prior to the Closing Date without breach of this Agreement (collectively, the
"Leases");
1.01-6 All rights, benefits and interests of Blue Oak under the
contracts, agreements, commitments, understandings, purchase orders, documents
and instruments listed on Schedule 4.16 hereto and under any contracts,
agreements, commitments, understandings, purchase orders, documents or
instruments entered into between the date hereof and the Closing Date and
expressly assumed by GDSC in writing on the Closing Date as provided in Section
1.04-3(d), other than to the extent such items have terminated, expired or been
disposed of by Blue Oak prior to the Closing Date without breach of this
Agreement (collectively, the "Contracts");
1.01-7 All assignable rights to all telephone lines and numbers used
in the conduct of the Dental Practice; and
2
<PAGE>
1.01-8 All right, title and interest in and to Blue Oak's trade names.
1.02 Excluded Assets. The Assets shall not include the following:
1.02-1 Any lease not listed on Schedule 4.15 and any contract,
agreement, commitment, understanding, purchase order, document or instrument not
listed on Schedule 4.16, unless pursuant to Section 1.04-3(d) GDSC expressly
agrees in writing on the Closing Date to assume the obligations under such
lease, contract, agreement, commitment, understanding, purchase order, document
or instrument, in which case Blue Oak shall assign its rights and benefits
thereunder to GDSC and the same shall be treated as a "Lease" or "Contract" for
purposes of this Agreement; and
1.02-2 The assets identified on Schedule 1.02-2.
1.03 Assumption of Liabilities. Except for the liabilities and obligations
to be assumed by GDSC pursuant to Section 1.04-3, GDSC will not assume and will
not be liable for any liabilities of Blue Oak, known or unknown, contingent or
absolute, accrued or other, and the Assets shall be free of all liabilities,
obligations, liens and encumbrances. Without limiting the generality of the
foregoing and except as otherwise provided above, GDSC will not be responsible
for any of the following:
1.03-1 Liabilities, obligations or debts of Blue Oak, whether fixed,
contingent or mixed and whether based on events occurring before or after the
Closing Date, including without limitation those based on tort, contract,
statutory or other claims or involving fines or penalties payable to any
governmental authority;
1.03-2 Liabilities, obligations or debts of Blue Oak for any federal,
state or local tax, including without limitation federal income taxes, state
income and excise taxes, state and local real and personal property taxes and
federal, state and local withholding and payroll taxes;
1.03-3 Liabilities or obligations of Blue Oak to employees for
salaries, bonuses or health and welfare benefits or with respect to any profit
sharing, stock bonus, pension, retirement, stock purchase, option, bonus or
deferred compensation plan or for any other benefits or compensation (including
without limitation accrued vacation or sick leave); and
1.03-4 Liabilities or obligations of Blue Oak for employee severance
payments or arrangements resulting from termination of Blue Oak's employees.
1.04 Purchase Price. The total purchase price for the Assets (the "Purchase
Price") shall be the following:
1.04-1 $775,000, payable by check on the Closing Date.
1.04-2 A number of shares of GDSC's Common Stock ("GDSC Common Stock")
determined by dividing $475,000 by a number (the "Stock Price") equal to the
lower of (a) the initial
3
<PAGE>
public offering price per share of GDSC Common Stock in GDSC's initial public
offering (the "IPO") pursuant to the Registration Statement on Form SB-2
(Registration No. 333-13529) (the "Registration Statement") under the Securities
Act of 1933 (the "1933 Act"), or (b) the average of the closing prices of GDSC
Common Stock reported by NASDAQ for the ten trading days ending five trading
days prior to the Closing Date.
1.04-3 The assumption by GDSC on the Closing Date, pursuant to the
terms of an Assumption Agreement in substantially the form attached hereto as
Exhibit A, of the following liabilities of Blue Oak (the "Assumed Liabilities"):
1.04-3(a) the accounts payable, accrued liabilities and
indebtedness associated with the Dental Practice to the extent and in the
amounts identified on Schedules 4.11 and 4.12 (to the extent such liabilities
are not paid or discharged prior to the Closing Date); provided, however, that
GDSC's obligation to assume indebtedness owing to A. Hollis Field, Inc. as
identified on Schedule 4.12 shall be subject to the agreement by it to accept a
promissory note in the form attached hereto as Exhibit A-1 to evidence such
indebtedness at and after the Closing Date;
1.04-3(b) all liabilities of Blue Oak of a type identified on
Schedule 4.11 and incurred in the ordinary course of business after February 28,
1997 and on or before the Closing Date (to the extent such liabilities are not
paid or discharged prior to the Closing Date), but specifically excluding any
liabilities for brokers' and attorneys' fees and other expenses of this
transaction and accrued liabilities for taxes based on the income or revenues of
the Dental Practice;
1.04-3(c) all obligations of Blue Oak under any of the Leases or
Contracts listed on Schedule 4.15 or Schedule 4.16 hereto; and
1.04-3(d) all obligations of Blue Oak under any lease, contract,
agreement, commitment, understanding, purchase order, document or instrument
entered into by Blue Oak between the date of this Agreement and the Closing Date
that GDSC, in its sole discretion, elects on the Closing Date to assume.
1.04-4 A number of additional shares of GDSC Common Stock (the
"Earnout Shares") to be issued only if the EBITDA (as defined below) for the
12-month period ending March 31, 1998 exceeds $370,000. The amount by which the
EBITDA for the 12-month period ending March 31, 1998 exceeds $370,000 is
referred to as the "Excess EBITDA." If Earnout Shares are issuable, the number
of Earnout Shares shall be determined by dividing the Earnout Amount (as defined
below) by the Stock Price. If the Excess EBITDA is $101,000 or less, the
"Earnout Amount" shall equal 5.9406 times the Excess EBITDA. If the Excess
EBITDA is more than $101,000 and less than $150,000, the "Earnout Amount" shall
equal $600,000 plus 2.0408 times the amount by which the Excess EBITDA exceeds
$101,000. If the Excess EBITDA is $150,000 or more, the "Earnout Amount" shall
equal $700,000. The "EBITDA" shall mean the combined net income of (a) the
Professional Corporation and (b) GDSC from the provision of services to the
Professional Corporation, before any reduction for interest, income taxes,
depreciation or amortization, and excluding any allocation of GDSC corporate or
regional overhead expense, as reflected on a combined income statement for the
practice location prepared in conformity with generally accepted accounting
principles applied in a manner consistent with the application of such
4
<PAGE>
principles to the preparation of GDSC's audited financial statements; provided,
however, that compensation of all dentists shall be accrued in accordance with
the terms of Employment Agreements in the form attached hereto as Exhibit F. The
calculation of the Earnout Amount and the issuance of the Earnout Shares, if
any, shall be completed by May 31, 1998.
1.04-5 A total of $301,774 payable by delivering two promissory notes
in the forms attached hereto as Exhibits A-2 and A-3.
1.05 Escrow Shares.
1.05-1 At the "Closing" (as that term is defined in Section 1.08),
GDSC shall withhold from the shares of GDSC Common Stock to be delivered under
this Agreement the number of shares of GDSC Common Stock (the "Escrow Shares")
having a value of $100,000 at the Stock Price. The Escrow Shares shall be
evidenced by a certificate or certificates issued in the name of Blue Oak. GDSC
shall hold the certificate for the Escrow Shares for the benefit of Blue Oak,
which shall for all purposes be considered the legal owner of the Escrow Shares
held for its account and which shall have all rights of a shareholder of GDSC,
including the right to vote, either directly or through an authorized agent, and
receive current distributions of cash dividends, with respect to Escrow Shares
held for its account, other than the right to transfer Escrow Shares. The Escrow
Shares will appear as issued and outstanding on the balance sheet of GDSC. GDSC
shall hold and dispose of the Escrow Shares only as provided in this Agreement.
1.05-2 At the election of GDSC, any liability of Blue Oak under
Section 10.02 may be satisfied from the Escrow Shares. Once Blue Oak's liability
is established either by agreement, litigation or otherwise as provided in
Section 10.04, GDSC shall have the right to transfer to its own name or cancel
whole Escrow Shares having an aggregate value as nearly equal as possible but in
no event greater than the amount of Blue Oak's liability. The value of Escrow
Shares for this purpose shall be the Stock Price. On the first anniversary of
the Closing Date, if there are no claims outstanding by GDSC against Blue Oak
under Section 10.02, GDSC shall release all Escrow Shares that have not been
transferred to GDSC or cancelled, and shall deliver the certificates for those
shares to Blue Oak. If a claim is outstanding on the first anniversary of the
Closing Date, GDSC shall promptly release all remaining Escrow Shares once all
outstanding claims have been resolved and paid.
1.06 Instruments of Conveyance and Transfer. The sale of the Assets, and
the conveyance, assignment, transfer and delivery of all of the Assets other
than the patient charts and rights to the trade name "Blue Oak Dental Group,"
shall be effected by Blue Oak's execution and delivery to GDSC, on the Closing
Date, of a bill of sale in substantially the form of the Assignment and Bill of
Sale attached hereto as Exhibit B. The conveyance, assignment, transfer and
delivery of Blue Oak's patient charts and the rights to the trade name "Blue Oak
Dental Group" shall be effected by Blue Oak's execution and delivery to the
Professional Corporation, on the Closing Date, of an assignment in substantially
the form of the Assignment attached hereto as Exhibit C.
1.07 Further Assurances. Blue Oak agrees that, at any time and from time to
time on and after the Closing Date, it will, upon the request of GDSC and
without further consideration, take all steps reasonably necessary to place GDSC
(or the Professional Corporation, as the case may be)
5
<PAGE>
in possession and operating control of the Assets and Blue Oak will do, execute,
acknowledge and deliver, or will cause to be done, executed, acknowledged and
delivered, all further acts, deeds, assignments, conveyances, transfers, powers
of attorney or assurances as reasonably required to sell, assign, convey,
transfer, grant, assure and confirm to GDSC (or the Professional Corporation, as
the case may be), or to aid and assist in the collection of or reducing to
possession by GDSC (or the Professional Corporation, as the case may be) of, all
of the Assets, or to vest in GDSC (or the Professional Corporation, as the case
may be) good, valid and marketable title to the Assets.
1.08 Closing. The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Stoel Rives LLP,
900 SW Fifth Avenue, Suite 2300, Portland, Oregon, at 10:00 a.m., Pacific time,
on March 31, 1997 or at another date, time and place agreed upon in writing by
the parties (the "Closing Date").
1.09 Sales Tax. GDSC shall pay Blue Oak, and Blue Oak shall collect from
GDSC on the Closing Date, any sales tax owing in respect of the purchase of the
Assets. Blue Oak shall promptly file all necessary sales tax returns and pay all
sales taxes due following the Closing Date. As soon as practicable following the
Closing Date, Blue Oak shall deliver to GDSC receipts from the appropriate
taxing authorities showing that all sales taxes owing have been paid.
1.10 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets in accordance with Schedule 1.10, and GDSC and Blue Oak shall
be bound by that allocation in reporting the transactions contemplated by this
Agreement to any governmental authority (including without limitation the
Internal Revenue Service).
ARTICLE II
Representations and Warranties of GDSC
GDSC represents and warrants to Blue Oak as follows:
2.01 Authorization. GDSC is a corporation, duly organized, validly existing
and in good standing under the laws of the State of Washington and has all
requisite corporate power and authority to own and operate its properties and to
carry on its business as now conducted. GDSC has taken all corporate action
necessary to authorize its execution, delivery and performance of this
Agreement. GDSC has full corporate power and authority to enter into this
Agreement and carry out the terms hereof. This Agreement has been duly executed
and delivered by GDSC and is binding upon and enforceable against GDSC in
accordance with its terms, except as enforceability may be limited or affected
by applicable bankruptcy, insolvency, reorganization, or other laws of general
application relating to or affecting creditors' rights generally and except as
enforceability may be limited by rules of law governing specific performance,
injunctive relief or other equitable remedies.
2.02 Capitalization. The authorized capital stock of GDSC consists of
50,000,000 shares of Common Stock, of which 3,041,881 shares are issued and
outstanding; and 30,000,000 shares of Preferred Stock, of which no shares are
issued and outstanding. All issued and outstanding shares of GDSC capital stock
are validly issued, fully paid and nonassessable, and have been issued without
6
<PAGE>
violation of any preemptive rights. There is no subscription, option, warrant,
call, right, agreement or commitment (including any right of conversion or
exchange under any outstanding security or other instrument) relating to the
issuance by GDSC of GDSC capital stock other than outstanding options under the
GDSC 1993 Stock Incentive Plan, warrants described in the Registration Statement
and outstanding offers and/or agreements to acquire other dental practices in
exchange for Common Stock. The GDSC Common Stock to be issued under this
Agreement will, when issued, be duly and validly authorized and issued, fully
paid and nonassessable.
2.03 Compliance. The execution, delivery and performance of this Agreement
by GDSC, the compliance by GDSC with the provisions of this Agreement and the
consummation of the transactions described in this Agreement will not conflict
with or result in the breach of any of the terms or provisions of or constitute
a default under:
2.03-1 the articles of incorporation or bylaws of GDSC;
2.03-2 any note, indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument to which GDSC is a party or by which GDSC
is bound; or
2.03-3 any statute or any order, rule, regulation or decision of any
court or regulatory authority or governmental body applicable to GDSC.
2.04 Consents. No consent, approval, authorization, order, designation or
declaration of any court or regulatory authority or governmental body, federal
or other, or third person is required to be obtained by GDSC for the
consummation of the transactions described in this Agreement.
2.05 Accuracy of Representations & Warranties. None of the representations
or warranties of GDSC contains or will contain any untrue statement of any
material fact or omits or misstates a material fact necessary to make the
statements contained in this Agreement not misleading. GDSC does not know of any
fact that has resulted or that, in the reasonable judgement of GDSC will result,
in any material change in GDSC's business, results of operation, financial
condition or prospects that has not been set forth in this Agreement or the
Registration Statement.
2.06 Rule 144. With a view to making available to the Partners the benefits
of Rule 144 promulgated under the 1933 Act, GDSC agrees, during the one-year
period starting on the first anniversary of the Closing Date or such longer
period as the public resale of shares of GDSC Common Stock issued under this
Agreement ("Shares") by a nonaffiliate of GDSC is subject to Rule 144, to file
with the Securities and Exchange Commission in a timely manner all reports and
other documents required of GDSC under the Securities Exchange Act of 1934. GDSC
agrees to remove the legend described in the last sentence of Sections 3.02 and
4.27 from the certificates representing the Shares, upon request of the holder,
at any time after the second anniversary of the Closing Date or such other time
as the Shares may be freely sold by the holder without restriction under Rule
144.
7
<PAGE>
ARTICLE III
Individual Representations and Warranties of Partners
Each Partner represents and warrants to GDSC as follows:
3.01 Authority. Partner has full power and authority to enter into this
Agreement and carry out its terms. This Agreement has been duly and validly
executed and delivered by Partner and is binding upon and enforceable against
Partner in accordance with its terms, except as enforceability may be limited or
affected by applicable bankruptcy, insolvency, reorganization or other laws of
general application relating to or affecting the rights of creditors and except
as enforceability may be limited by rules of law governing specific performance,
injunctive relief or other equitable remedies.
3.02 Investment Representations. Partner is acquiring beneficial ownership
of Shares, and may receive a distribution of Shares from Blue Oak, for
investment for Partner's own account, and not with a view to, or for resale in
connection with, any distribution of the Shares. Partner is not a party to any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to any such person or any third party with
respect to the Shares. Partner acknowledges and understands that the Shares are
being offered and sold without registration under the 1933 Act or any state
securities law based on exemptions provided under such laws, and that Partner's
representations contained in this Agreement are being relied upon by GDSC in
connection with those exemptions. Partner further acknowledges and agrees that
the Shares are "restricted securities" under federal securities laws and as such
may not be sold or disposed of unless they are registered under the 1933 Act and
all applicable state securities laws or unless, in the opinion of counsel
acceptable to GDSC, exemptions from the registration requirements of the 1933
Act and all applicable state securities laws are available. In this regard,
Partner acknowledges that GDSC is under no obligation to register Partner's
Shares, that the Shares will not be eligible for resale in the public market
pursuant to Rule 144 under the 1933 Act until one year after the Closing Date,
and that Partner will bear the economic risk of ownership of the Shares at least
until that time. Partner consents to having appropriate legends placed on the
certificates representing the Shares relating to this restriction on transfer.
3.03 Access to Information. Partner has received and carefully reviewed the
final Prospectus dated February 13, 1997 filed with the Securities and Exchange
Commission as part of the Registration Statement. Partner believes he has
received all of the information he considers necessary or appropriate for
deciding whether to acquire shares of GDSC Common Stock. Partner further
represents that he has had an opportunity to ask questions and receive answers
from GDSC regarding GDSC, its business and financial condition, and the terms
and conditions of the Agreement.
3.04 Sophistication. Partner has such knowledge and experience in financial
and business matters that he is capable of evaluating the merits and risks of an
investment in the Shares and has the capacity to protect his own interests in
connection with the transaction. Partner acknowledges that he has received legal
advice regarding the Agreement and the securities law restrictions on the Shares
from Weintraub Genshlea & Sproul, Blue Oak's attorneys, and has received tax and
other
8
<PAGE>
accounting advice regarding this transaction from Burnett, Umphress and Kilgour,
Blue Oak's accountants.
ARTICLE IV
Representations and Warranties of Blue Oak and the Partners
As used in this Agreement, "Material Adverse Effect" means a material
adverse effect on the business, results of operations, financial position,
assets or prospects of the Dental Practice, which shall in any event include any
adverse effect on the assets, revenue or net income of Blue Oak in excess of
$15,000; and "Material Adverse Change" means any change that has resulted, will
result or is likely to result in a Material Adverse Effect. Blue Oak and the
Partners represent and warrant to GDSC as follows:
4.01 Organization; Authority. Blue Oak is a partnership duly organized and
validly existing under the laws of California and has the power to own and lease
its properties and carry on its business as now being conducted. The Partners
are the sole partners of Blue Oak and no person other than Jeffrey S. McClure
has any right to become a partner of Blue Oak or to acquire any partnership
interest in Blue Oak. Blue Oak has full power and authority to enter into this
Agreement and to carry out its terms. This Agreement has been duly and validly
executed and delivered by Blue Oak and is binding upon and enforceable against
Blue Oak in accordance with its terms, except as enforceability may be limited
or affected by applicable bankruptcy, insolvency, reorganization or other laws
of general application relating to or affecting the rights of creditors and
except as enforceability may be limited by rules of law governing specific
performance, injunctive relief or other equitable remedies.
4.02 No Adverse Consequences. Neither the execution and delivery of this
Agreement by Blue Oak or any Partner nor the consummation of the transactions
contemplated by this Agreement will
4.02-1 result in the creation or imposition of any lien, charge or
encumbrance on any of Blue Oak's assets or properties,
4.02-2 violate or conflict with any provision of Blue Oak's
partnership agreement,
4.02-3 violate any law, judgment, order, injunction, decree, rule,
regulation or ruling of any governmental authority applicable to Blue Oak, or
4.02-4 either alone or with the giving of notice or the passage of
time or both, conflict with, constitute grounds for termination or acceleration
of, result in the breach of the terms, conditions or provisions of, result in
the loss of any benefit to Blue Oak under or constitute a default under any
agreement, instrument, license or permit to which Blue Oak is a party or by
which Blue Oak is bound.
9
<PAGE>
4.03 Brokers and Finders. Blue Oak has not employed any broker, finder or
agent or dealt with anyone purporting to act in such capacity or agreed to pay
any brokerage fee, finder's fee or commission with respect to the transaction
contemplated by this Agreement.
4.04 Litigation. Except as set forth on Schedule 4.04, there is no claim,
litigation, proceeding or investigation of any kind pending or threatened by or
against Blue Oak and, to the best knowledge of Blue Oak and the Partners, there
is no basis for any such claim, litigation, proceeding or investigation.
4.05 Compliance with Laws. Blue Oak has at all relevant times conducted its
business in compliance with all applicable laws and regulations. Blue Oak is not
in violation of any applicable laws or regulations, other than violations which
singly or in the aggregate do not, and, with the passage of time will not, have
a Material Adverse Effect. Blue Oak is not subject to any outstanding order,
writ, injunction or decree, and Blue Oak has not been charged with, or
threatened with a charge of, a violation of any provision of federal, state or
local law or regulation.
4.06 Employment Matters.
4.06-1 Labor Matters
(a) Blue Oak is not a party or otherwise subject to any
collective bargaining or other agreement governing the wages, hours or terms of
employment of its employees. Blue Oak is and has been in compliance with all
applicable laws regarding employment and employment practices, terms and
conditions of employment, wages and hours and is not and has not been engaged in
any unfair labor practice.
(b) There is no (1) unfair labor practice complaint against Blue
Oak pending before the National Labor Relations Board or any other governmental
authority, (2) labor strike, slowdown or work stoppage actually occurring or, to
the best of the knowledge of Blue Oak or any Partner, threatened against Blue
Oak, (3) representation petition respecting Blue Oak's employees pending before
the National Labor Relations Board, or (4) grievance or any arbitration
proceeding pending arising out of or under collective bargaining agreements
applicable to Blue Oak.
(c) Blue Oak has not experienced any primary work stoppage or
other organized work stoppage involving its employees in the past two years.
4.06-2 Employee Benefits. Schedule 4.06-2 lists all pension,
retirement, profit sharing, deferred compensation, bonus, commission, incentive,
life insurance, health and disability insurance, hospitalization and all other
employee benefit plans or arrangements (including, without limitation, any
contracts or agreements with trustees, insurance companies or others relating to
any such employee benefit plans or arrangements) established or maintained by
Blue Oak, and complete and accurate copies of all those plans or arrangements
have been provided to GDSC. The employee pension benefit plans (within the
meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") established and maintained by Blue Oak that are subject to
ERISA are listed separately as ERISA Plans on Schedule 4.06-2 (the "ERISA
Plans"). The ERISA Plans comply with the applicable requirements of ERISA. Blue
Oak has received from
10
<PAGE>
the Internal Revenue Service a favorable determination for each of the ERISA
Plans and their related trusts that each of the ERISA Plans is qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code") and
the related trust is tax-exempt under Section 501(a) of the Code. There has been
no event subsequent to that determination that has adversely affected the tax
qualified status of the ERISA Plans or the exemption of the related trusts other
than changes in the Code that are not effective as of the Closing Date. No
"accumulated funding deficiency" as defined in Section 302(a)(2) of ERISA or
Section 412(a) of the Code exists, or has existed, with respect to any of the
ERISA Plans. The present value of all accrued benefits under each of the ERISA
Plans does not exceed the value of such plan's assets, less all liabilities
other than those attributable to accrued benefits. Blue Oak has no "potential
withdrawal liability," as defined in Section 4201 of ERISA. None of the ERISA
Plans, its related trusts or any trustee, investment manager or administrator
thereof has engaged in a nonexempt "prohibited transaction," as such term is
defined in Section 406 of ERISA and Section 4975 of the Code. There are not and
have not been any excess deferrals or excess contributions under any ERISA Plan.
Each ERISA Plan is and has been operated and administered in conformance with
the requirements of all applicable laws and regulations, whether or not the
ERISA Plan documents have been amended to reflect such requirements. Blue Oak
has no obligation of any kind (whether under the terms of the ERISA Plans or
under any understanding with employees) to make payments under, or to pay
contributions to or in respect of, any plan or arrangement listed on Schedule
4.06-2, or any other plan, agreement or other arrangement for deferred
compensation of employees, whether or not tax qualified, including, without
limitation, a single employer tax qualified plan, a tax qualified plan of a
controlled group of corporations, a multi-employer pension plan, a nonqualified
deferred compensation plan, an individual employment or compensation agreement
or a commitment to provide medical benefits to retirees.
4.06-3 Employment Agreements. Each of Blue Oak's employees is an
"at-will" employee and, except as listed on Schedule 4.06-3, there are no
written employment, commission or compensation agreements of any kind between
Blue Oak and any of Blue Oak's employees. Schedule 4.06-3 lists all of Blue
Oak's employment or supervisory manuals, employment or supervisory policies, and
written information generally provided to employees (such as applications or
notices), and true and complete copies of those manuals, policies and written
information have been provided to GDSC. Blue Oak does not have any agreements or
understandings with Blue Oak's employees except as reflected in the items listed
in Schedules 4.06-2 and 4.06-3.
4.06-4 Compensation. Schedule 4.06-4 contains a complete and accurate
list of all employees or consultants of Blue Oak as of February 28, 1997,
specifying their names and job designations, hire dates, average hours worked
per week, the total amount paid or payable as compensation to each such person,
and the basis of such compensation, whether fixed or commission or a combination
thereof, and accrued benefits for such persons as of February 28, 1997.
4.07 Financial Statements.
4.07-1 Schedule 4.07 contains unaudited balance sheets of Blue Oak as
of December 31, 1996 and 1995, and the related statements of income for the
years then ended and the unaudited balance sheet of Blue Oak as of February 28,
1997 (the "Current Balance Sheet") and the
11
<PAGE>
related statement of income for the two months then ended (all such balance
sheets and statements collectively, the "Financial Statements").
4.07-2 The Financial Statements present fairly
(a) the financial position of Blue Oak as of the dates indicated
and
(b) the results of operations for the periods then ended, all in
conformity with generally accepted accounting principles applied on a consistent
basis.
4.08 Receivables. Schedule 4.08 lists all receivables of Blue Oak
(including accounts receivable, loans receivable and advances) as of February
28, 1997. Each of the receivables listed on Schedule 4.08, and each of the
receivables that has arisen since February 28, 1997, has arisen only from bona
fide transactions in the ordinary course of Blue Oak's business and is not
subject to any offset or counterclaim.
4.09 Prepaid Expenses and Other. Schedule 4.09 lists all prepaid expenses
and deferred charges of Blue Oak reflected on the Current Balance Sheet as well
as the items included in the Other Assets line, if any, on the Current Balance
Sheet.
4.10 Personal Property. Section 1.01-1 and Schedule 4.10 together contain a
complete and accurate list of all the tangible personal property owned or leased
by Blue Oak, other than excluded assets listed in Schedule 1.02-2 ("Tangible
Personal Property"). With respect to each item of owned Tangible Personal
Property, Schedule 4.10 lists the original cost, age, book value as of the date
of the Current Balance Sheet, method of depreciation and estimated fair market
value. With respect to each item of leased Tangible Personal Property, Schedule
4.10 lists the annual rent, expiration date, renewal options, lessor and age.
4.11 Payables. Schedule 4.11 lists all accounts payable and other accrued
liabilities of Blue Oak as of February 28, 1997, other than payables for
brokers' and attorneys' fees and other expenses of this transaction.
4.12 Indebtedness. Schedule 4.12 lists all indebtedness of Blue Oak as of
February 28, 1997 and for each item shows the name of lender, interest rate,
term, payments, seniority and security.
4.13 Other Liabilities. Except as listed on Schedule 4.13, Blue Oak does
not have any liability or obligation (whether absolute, accrued, contingent or
other, and whether due or to become due) which is not accrued, reserved against
or disclosed in the Current Balance Sheet, other than liabilities incurred in
the ordinary course of business consistent with past practice, which
individually or in the aggregate are not material to Blue Oak.
4.14 Absence of Certain Changes or Events. Since the date of the Current
Balance Sheet, there has not been:
12
<PAGE>
4.14-1 Any Material Adverse Change or any event, occurrence,
development or state of circumstances or facts which could reasonably be
expected to result in a Material Adverse Change;
4.14-2 Any damage, destruction or casualty loss, whether insured
against or not, to any of Blue Oak's assets or properties;
4.14-3 Any increase in the rate or terms of compensation payable or to
become payable by Blue Oak to its key employees; any increase in the rate or
terms of any bonus, insurance, pension or other employee benefit plan, payment
or arrangement made to, for or with any such key employees; any special bonus or
remuneration paid; or any written employment contract executed or amended;
4.14-4 Any entry into any agreement, commitment or transaction
(including, without limitation, any borrowing, capital expenditure or capital
financing or any amendment, modification or termination of any existing
agreement, commitment or transaction) by Blue Oak, except agreements,
commitments or transactions in the ordinary course of business and consistent
with past practices or as expressly contemplated in this Agreement;
4.14-5 Any conduct of business which is outside the ordinary course of
business or not substantially in the manner that Blue Oak previously conducted
the Dental Practice;
4.14-6 Any purchase or other acquisition of property, any sale, lease
or other disposition of property, or any expenditure, except in the ordinary
course of business;
4.14-7 Any incurrence of any noncontract liability which, either
singly or in the aggregate is material to the business, results of operations,
financial condition or prospects of Blue Oak;
4.14-8 Any encumbrance or consent to encumbrance of any property or
assets of Blue Oak except in the ordinary course of business; or
4.14-9 Any change in the assets, liabilities, licenses, permits or
franchises of Blue Oak, or in any agreement to which Blue Oak is a party or is
bound, which has had or reasonably could be expected to have a Material Adverse
Effect.
4.15 Leases. Schedule 4.15 contains a complete and accurate list of all
Leases of real property under which Blue Oak is a lessee, a description of the
real property covered thereby ("Real Property"), the term of each Lease and the
monthly payments under the Lease (including triple net charges and other
assessments). Blue Oak does not own any real property. Complete and accurate
copies of all Leases have been delivered to GDSC.
4.16 Certain Contracts and Arrangements. Schedule 4.16, which is organized
by type of agreement, contains a complete and accurate list of all Contracts of
the following types to which Blue Oak is a party or by which Blue Oak is bound:
13
<PAGE>
4.16-1 any mortgage, note or other instrument or agreement relating to
the borrowing of money or the incurrence of indebtedness by Blue Oak or Blue
Oak's guaranty of any obligation for the borrowing of money;
4.16-2 contracts, agreements, purchase orders or acknowledgment forms
for the purchase, sale, lease or other disposition of Blue Oak's equipment,
materials or capital assets;
4.16-3 contracts or agreements for the performance of services;
4.16-4 contracts or agreements for the joint performance of work or
services and all other joint venture agreements;
4.16-5 contracts or agreements with agents, brokers, consignees, sales
representatives or distributors relating to the sale of Blue Oak's services; and
4.16-6 any other contract, instrument, agreement or obligation not
described on any other Schedule to which Blue Oak is a party or by which Blue
Oak is bound and which contains material unfulfilled obligations of Blue Oak.
Complete and accurate copies of all Contracts have been delivered to GDSC.
4.17 Status of Contracts and Leases.
4.17-1 Each of the Contracts and Leases listed on Schedules 4.15 and
4.16 is valid, binding and enforceable by Blue Oak in accordance with its terms
and is in full force and effect. There is no existing default or violation by
Blue Oak under any Contract or Lease and no event has occurred which (whether
with or without notice, lapse of time or both) would constitute a default of
Blue Oak under any Contract or Lease. There is no pending or threatened
proceeding which would interfere with the quiet enjoyment of any Real Property
of which Blue Oak is lessee or sublessee.
4.17-2 All other parties to the Contracts and Leases have consented or
prior to the Closing will have consented (where such consent is necessary) to
the consummation of the transaction contemplated by this Agreement without
requiring modification of Blue Oak's rights or obligations under any Contract or
Lease.
4.17-3 Neither Blue Oak nor any Partner is aware of any default by any
other party to any Contract or Lease or of any event which (whether with or
without notice, lapse of time or both) would constitute a default by any other
party with respect to obligations of that party under any Contract or Lease,
and, to the knowledge of Blue Oak and the Partners, there are no facts that
exist indicating that any of the Contracts or Leases may be totally or partially
terminated or suspended by the other parties.
4.17-4 Blue Oak is not a party to, nor is it bound by, any contract or
agreement that Blue Oak or any Partner can reasonably foresee will result in any
material loss to Blue Oak upon the performance thereof (including any material
liability for penalties or damages, whether liquidated,
14
<PAGE>
direct, indirect, incidental or consequential), unless such contract or
agreement is terminable by Blue Oak on 60 or fewer days notice at any time
without penalty.
4.18 Title and Condition of Tangible Assets.
4.18-1 Blue Oak owns all of the Tangible Personal Property free and
clear of all mortgages, pledges, security interests, claims, charges or other
encumbrances or restrictions of any kind, except
(a) liens disclosed on the Current Balance Sheet,
(b) security interests or liens securing payment of Assumed
Liabilities or
(c) liens for taxes not yet due or being contested in good faith
(and for which adequate accruals or reserves have been established on the
Current Balance Sheet).
4.18-2 Blue Oak has good and absolute title to the Tangible Personal
Property except the leased property.
4.18-3 All Tangible Personal Property has been maintained and operated
in accordance with manufacturer's specifications and prudent industry practices,
is in a good state of maintenance and repair, ordinary wear and tear excepted,
and is adequate for the conduct of Blue Oak's business.
4.18-4 There are no developments affecting any of the Real Property or
Tangible Personal Property pending or, to the knowledge of Blue Oak and the
Partners, threatened which might materially detract from the value of such
property or assets, materially interfere with any present or intended use of any
such property or assets or materially adversely affect the marketability of such
properties or assets.
4.18-5 At the Closing, GDSC will acquire good title to all the Assets,
free and clear of all mortgages, pledges, security interests, claims, charges or
other encumbrances or restrictions of any kind, except for security interests or
liens securing payment of Assumed Liabilities.
4.19 Insurance. Schedule 4.19 contains a complete and accurate list of all
policies of malpractice, liability, fire, worker's compensation and other forms
of insurance insuring Blue Oak, its partners or employees, and its assets or
operations (the "Policies"), setting forth the applicable deductible amounts.
All the Policies are valid, enforceable and in full force and effect, all
premiums with respect to the Policies covering all periods up to and including
the date as of which this representation is being made have been paid and no
notice of cancellation or termination has been received with respect to any
Policy. The Policies are sufficient for compliance with all requirements of law
and of agreements to which Blue Oak is a party and provide insurance for the
risks and in the amounts and types of coverage usually obtained by persons using
or holding similar properties in similar businesses. There have been no claims
made for insurance payment under any of the Policies. True and complete copies
of the Policies and all endorsements thereto have been delivered
15
<PAGE>
to GDSC. Blue Oak has not been refused any insurance coverage and no insurance
coverage has been cancelled during the five years preceding the date of this
Agreement.
4.20 Taxes.
4.20-1 Returns. Blue Oak has filed all federal, state and other
returns, reports and information returns required to be filed by it with respect
to Taxes (as defined below) which relate to the business, results of operations
or financial condition of Blue Oak (collectively, the "Returns") and has timely
paid all Taxes shown to be due on the Returns. All Returns filed are complete
and accurate in all material respects, and no additional Taxes are owed by Blue
Oak with respect to the periods covered by the Returns. Blue Oak has provided
GDSC with complete and accurate copies of Blue Oak's Returns for 1994 and 1995.
4.20-2 Taxes Paid or Reserved. All deficiencies in Taxes asserted or
assessments made by any taxing authority have been fully paid or finally
settled. All Taxes which Blue Oak has been required to collect or withhold have
been withheld or collected and, to the extent required, have been paid to the
proper taxing authority.
4.20-3 Definition. "Taxes" means all taxes, charges, fees, levies or
other assessments including, without limitation, income, excise, property,
sales, use and franchise taxes, imposed by the United States or any state,
county, local or foreign government or subdivision or agency thereof, and
including any interest, penalties or additions.
4.21 No Restrictions. No contract or agreement to which Blue Oak is a party
or is bound or to which any of its properties or assets is subject limits the
freedom of Blue Oak to compete in any line of business or with any person.
4.22 Permits and Licenses. Blue Oak and the Partners hold and at all times
have held, all licenses, permits, franchises, easements and authorizations
(collectively, "Permits") necessary for the lawful conduct of the Dental
Practice pursuant to all applicable statutes, laws, ordinances, rules and
regulations of all governmental bodies, agencies and other authorities having
jurisdiction over it or any part of its operations, except where the failure to
hold any Permit, singly or in the aggregate, either alone or with the giving of
notice or the passage of time or both, would not have a Material Adverse Effect.
Blue Oak is in compliance with all the terms of each Permit, and there are no
claims of violation by Blue Oak of any Permit.
4.23 Certain Payments. Neither Blue Oak nor any other person or entity has,
directly or indirectly, on behalf of or with respect to the Dental Practice or
its operations made or received any payment that was not legal to make or
receive under federal, state or local laws of the United States or any other
country or territory.
4.24 Environmental Conditions.
4.24-1 Compliance. Blue Oak has operated the Dental Practice and
maintained the Assets, including without limitation the Real Property, in
compliance with all Environmental Laws. All wastes generated in connection with
Blue Oak's business are and have been transported and
16
<PAGE>
disposed of off site in compliance with all Environmental Laws. Except as
otherwise required for the normal operation of a dental practice, no Hazardous
Substance is or has been generated, manufactured, treated, stored, transported,
used or otherwise handled on the Real Property or in connection with the Dental
Practice.
4.24-2 Definitions. As used in this Agreement,
(a) "Environmental Law" means any federal, state or local
statute, ordinance or regulation pertaining to the protection of human health or
the environment and any applicable orders, judgments, decrees, permits, licenses
or other authorizations or mandates under such statutes, ordinances or
regulations, and
(b) "Hazardous Substance" means any hazardous, toxic, radioactive
or infectious substance, material or waste as defined, listed or regulated under
any Environmental Law, and includes without limitation petroleum oil and its
fractions.
4.25 Consents and Approvals. Except as set forth on Schedule 4.25, no
consent, approval or authorization of any court, regulatory authority,
governmental body, or any other entity or person not a party to this Agreement
is required for the consummation of the transactions described in this Agreement
by Blue Oak or the Partners. Blue Oak has obtained, or shall have obtained prior
to the Closing, all consents, authorizations or approvals of any third parties
required in connection with the execution, delivery or performance of this
Agreement by Blue Oak or the Partners. Blue Oak has made all registrations or
filings with any governmental authority required on its part for the execution
or delivery of this Agreement or the consummation of the transaction
contemplated hereby.
4.26 Records. The books of account of Blue Oak are complete and accurate in
all material respects, and there have been no transactions involving the
business of Blue Oak which properly should have been set forth therein and which
have not been accurately so set forth. Complete and accurate copies of such
books have been made available to GDSC.
4.27 Investment Representations. Blue Oak is acquiring beneficial ownership
of the Shares for investment for Blue Oak's own account, and not with a view to,
or for resale in connection with, any distribution of the Shares, other than a
partnership distribution of Shares pro rata to the Partners. Blue Oak is not a
party to any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participation to any such person or any third party with
respect to the Shares. Blue Oak acknowledges and understands that the Shares are
being offered and sold without registration under the 1933 Act or any state
securities law based on exemptions provided under such laws, and that Blue Oak's
representations contained in this Agreement are being relied upon by GDSC in
connection with those exemptions. Blue Oak further acknowledges and agrees that
the Shares are "restricted securities" under federal securities laws and as such
may not be sold or disposed of unless they are registered under the 1933 Act and
all applicable state securities laws or unless, in the opinion of counsel
acceptable to GDSC, exemptions from the registration requirements of the 1933
Act and all applicable state securities laws are available. Blue Oak consents to
having appropriate legends placed on the certificates representing the Shares
relating to this restriction on transfer.
17
<PAGE>
4.28 Reliance. Blue Oak and the Partners recognize and agree that,
notwithstanding any investigation by GDSC, GDSC is relying upon the
representations and warranties made by Blue Oak and the Partners in this
Agreement.
4.29 Accuracy of Representations and Warranties. None of the
representations or warranties of Blue Oak and the Partners contains or will
contain any untrue statement of any material fact or omits or misstates a
material fact necessary to make the statements contained in this Agreement not
misleading. Blue Oak and the Partners do not know of any fact that has resulted
or that, in the reasonable judgment of Blue Oak and the Partners will result, in
any material change in Blue Oak's business, results of operation, financial
condition or prospects that has not been set forth in this Agreement.
ARTICLE V
Covenants of Blue Oak and the Partners
5.01 Access to Properties, Books and Records. Prior to the Closing Date,
Blue Oak shall, at GDSC's request, afford or cause to be afforded to the agents,
attorneys, accountants and other authorized representatives of GDSC reasonable
access during normal business hours to all employees, properties, books and
records of Blue Oak and shall permit such persons, at GDSC's expense, to make
copies of such books and records. Blue Oak shall deliver to GDSC monthly
financial statements of Blue Oak promptly after they become available. GDSC
shall treat, and shall cause all of its agents, attorneys, accountants and other
authorized representatives to treat, all information obtained pursuant to this
Section 5.01 as confidential in accordance with Section 11.01 hereof. No
investigation by GDSC or any of its authorized representatives pursuant to this
Section 5.01 shall affect any representation, warranty or closing condition of
any party hereto or GDSC's rights to indemnification pursuant to Section 10.02
hereof.
5.02 Negative Covenants. Except as otherwise permitted by this Agreement or
with the prior written consent of GDSC, prior to the Effective Time, Blue Oak
shall not:
5.02-1 Incur additional debt for borrowed money (including without
limitation obligations under leases for real or personal property whether or not
required to be capitalized under generally accepted accounting principles),
incur or increase any obligation or liability (fixed, contingent or other,
including without limitation liabilities as a guarantor or otherwise with
respect to obligations of others) except in the ordinary and usual course of
business and consistent with past practices, forgive or release any debt or
claim, give any waiver of any right of material value or voluntarily suffer any
extraordinary loss;
5.02-2 Make any payment to discharge or satisfy any lien or
encumbrance or pay any obligation or liability (fixed or contingent) other than
(a) current liabilities (including the current portion of any long-term
liabilities) included in the Financial Statements and (b) current liabilities
incurred or maturing since the date of the Current Balance Sheet in the ordinary
course of business;
18
<PAGE>
5.02-3 Declare, pay or make any distribution of money or property to
the Partners other than ordinary Partner draws consistent with past practices;
5.02-4 Issue, sell, or give any option or right to purchase any of its
partnership interests or other securities, or purchase, redeem or otherwise
acquire or commit to acquire, directly or indirectly, any shares of its
partnership interests:
5.02-5 Mortgage, pledge, otherwise encumber or subject to lien any of
its assets or properties, tangible or intangible, or commit itself to do any of
the foregoing;
5.02-6 Except in the ordinary and usual course of its business and in
each case for fair consideration, dispose of, or agree to dispose of, any of its
assets or lease or license to others, or agree so to lease or license, any of
its assets;
5.02-7 Acquire any assets which would be material to the Dental
Practice other than assets acquired in the ordinary and usual course of business
and consistent with past practices;
5.02-8 Purchase or otherwise acquire, or agree to purchase or
otherwise acquire, any debt or equity securities of any corporation,
partnership, joint venture, firm or other entity other than equity securities
issued by a money market fund registered as an investment company under the
Investment Company Act of 1940;
5.02-9 Enter into any transaction or contract or make any commitment
to do the same, except in the ordinary and usual course of business and not
requiring the payment in any case of an amount in excess of $1,000 annually;
5.02-10 Increase the wages, salaries, compensation, pension or other
benefits payable, or to become payable by it, to any of its employees or agents,
including without limitation any bonus payments or severance or termination pay,
other than increases in wages and salaries required by employment arrangements
existing on the date hereof or otherwise in the ordinary and usual course of its
business;
5.02-11 Implement or agree to any implementation of or amendment or
supplement to any employee profit sharing, pension, bonus, commission,
incentive, retirement, medical reimbursement, life insurance, deferred
compensation or any other employee benefit plan or arrangement;
5.02-12 Change the accounting methods, policies or practices of Blue
Oak; or
5.02-13 Agree or commit to do any of the foregoing.
5.03 Affirmative Covenants. Except as otherwise permitted by this Agreement
or with the prior written consent of GDSC, prior to the Closing Date, Blue Oak
shall:
5.03-1 Operate the Dental Practice, including collecting receivables
and paying payables, as presently operated and only in the ordinary course and
consistent with past practices;
19
<PAGE>
5.03-2 Advise GDSC in writing of any litigation or administrative
proceeding that challenges or otherwise materially affects the transactions
contemplated hereby and of any Material Adverse Change or any event, occurrence
or circumstance which is likely to cause a Material Adverse Change;
5.03-3 When the consent of any third party to the transactions
contemplated by this Agreement is required under the terms of any contract or
agreement material to the Dental Practice to which Blue Oak is a party or by
which Blue Oak is bound, use its best efforts to obtain such consent on terms
and conditions not materially less favorable than those in effect on the date
hereof;
5.03-4 Use its best efforts to maintain all of the Tangible Personal
Property in good operating condition, reasonable wear and tear excepted,
consistent with past practices, and take all steps reasonably necessary to
maintain its intangible assets;
5.03-5 Not cancel or change any policy of insurance (including
self-insurance) or fidelity bond or any policy or bond providing substantially
the same coverage;
5.03-6 Maintain, consistent with past practices, all inventories,
spare parts, office supplies and other expendable items;
5.03-7 Use its best efforts to retain all employees;
5.03-8 Maintain its books and records in accordance with past
practices;
5.03-9 Pay and discharge all taxes, assessments, governmental charges
and levies imposed upon it, its income or profits or upon any property belonging
to it, in all cases prior to the date on which penalties attach thereto; and
5.03-10 Comply with all laws, rules and regulations applicable to it
and the Dental Practice.
5.04 No Negotiations With Others. Except as otherwise permitted by this
Agreement or with the prior written consent of GDSC, Blue Oak and the Partners
shall refrain, and shall cause Blue Oak's employees and any investment banker,
attorney, accountant or other agent retained by it to refrain, from initiating
or soliciting any inquiries or making any proposals with respect to, or engaging
in negotiations concerning, or providing any confidential information or data to
or having any discussions with any person relating to, any acquisition, business
combination or purchase of all or any significant portion of the assets of, Blue
Oak. Blue Oak and the Partners will immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing.
5.05 Profit Sharing Plan. Prior to Closing, Blue Oak shall authorize the
termination of the Blue Oak Dental Group Profit Sharing Plan and Trust (the
"Profit Sharing Plan") effective as of the Closing. The assets of the Profit
Sharing Plan shall be distributed to the plan beneficiaries promptly after the
Closing. Any and all expenses of the administration and termination of the
Profit Sharing Plan shall be paid by the Profit Sharing Plan or by the Partners,
and GDSC shall not incur
20
<PAGE>
any liability, or be required to take any action, of any kind whatsoever in
connection with the administration or termination of the Profit Sharing Plan.
ARTICLE VI
Joint Covenants
GDSC, Blue Oak and the Partners covenant and agree that they will act in
accordance with the following:
6.01 Governmental Consents. Promptly following the execution of this
Agreement, the parties will proceed to prepare and file with the appropriate
governmental authorities any requests for approval or waiver, if any, that are
required from governmental authorities in connection with the transactions
contemplated hereby, and the parties shall diligently and expeditiously
prosecute and cooperate fully in the prosecution of such requests for approval
or waiver and all proceedings necessary to secure such approvals and waivers.
6.02 Best Efforts; No Inconsistent Action. Each party will use its best
efforts to effect the transactions contemplated by this Agreement and to fulfill
the conditions to the obligations of the other parties set forth in Article 7 or
8 of this Agreement. No party will take any action inconsistent with its
obligations under this Agreement or that could hinder or delay the consummation
of the transactions contemplated by this Agreement, except that nothing in this
Section 6.02 shall limit the rights of the parties under Articles 7, 8 and 9.
ARTICLE VII
Conditions to Obligations of GDSC
The obligations of GDSC under Article 1 are, at its option, subject to
satisfaction, at or prior to the Closing, of each of the following conditions:
7.01 Governmental Approvals. All authorizations, consents and approvals of
all governmental agencies and authorities required to be obtained in order to
permit consummation of the transactions contemplated by this Agreement and the
operation of the Dental Practice by the Professional Corporation shall have been
obtained and be satisfactory in form and content to GDSC.
7.02 Consents. Blue Oak shall have obtained the third-party consents
required under the terms of the Contracts and Leases, and such consents shall
not have required any change to the terms and conditions of the Contracts and
Leases other than changes consented to in writing by GDSC.
7.03 Representations, Warranties and Covenants.
7.03-1 All representations and warranties of Blue Oak and the Partners
made in this Agreement, or in any certificate delivered pursuant hereto, shall
in all material respects be true and
21
<PAGE>
complete on and as of the Closing Date with the same force and effect as if made
on and as of that date.
7.03-2 All of the terms, covenants and conditions to be complied with
and performed by Blue Oak and the Partners at or prior to the Closing shall in
all material respects have been complied with or performed thereby.
7.03-3 GDSC shall have received a certificate of Blue Oak, dated as of
the Closing Date, to the effect that the representations and warranties of Blue
Oak and the Partners contained in this Agreement are in all material respects
true and complete on and as of the Closing Date as though made on and as of the
Closing Date and that Blue Oak has in all material respects complied with or
performed all terms, covenants and conditions to be complied with or performed
by him at or prior to the Closing.
7.04 Adverse Proceedings. No suit, action, claim or governmental proceeding
shall have been instituted or threatened against, and no order, decree or
judgment of any court, agency or other governmental authority shall have been
rendered against, GDSC, Blue Oak or any Partner to restrain or prohibit, or
obtain damages in respect of, this Agreement or the transactions contemplated by
this Agreement.
7.05 No Adverse Change. There shall not have been any Material Adverse
Change.
7.06 Support Services Agreement. The Professional Corporation shall have
executed and delivered a Support Services Agreement with GDSC in the form
attached hereto as Exhibit D.
7.07 Option Agreement. Dr. Mark Arena, as sole shareholder of the
Professional Corporation, shall have executed and delivered an Option Agreement
relating to the stock of the Professional Corporation in the form attached as
Exhibit E.
7.08 Employment Agreements. Each Partner and each other dentist employed by
Blue Oak shall have executed and delivered an Employment Agreement with the
Professional Corporation in the form attached hereto as Exhibit F and an
Addendum to such Employment Agreement in the form attached hereto as Exhibit G.
7.09 Opinion of Counsel. GDSC shall have received an opinion of Weintraub
Genshlea & Sproul, counsel to Blue Oak, dated the Closing Date, in substantially
the form attached hereto as Exhibit H.
7.10 Actions Satisfactory to GDSC's Counsel. All actions, proceedings,
instruments and documents required to be carried out by this Agreement, or
incidental hereto, and all other relevant legal matters shall be reasonably
satisfactory to counsel for GDSC.
22
<PAGE>
ARTICLE VIII
Conditions to Obligations of Blue Oak
The obligations of Blue Oak under Article 1 are, at its option, subject to
satisfaction, at or prior to the Closing, of each of the following conditions:
8.01 Representations, Warranties and Covenants.
8.01-1 All representations and warranties of GDSC made in this
Agreement and in any certificate delivered pursuant hereto shall in all material
respects be true and complete on and as of the Closing Date with the same force
and effect as if made on and as of that date.
8.01-2 All of the terms, covenants and conditions to be complied with
and performed by GDSC on or prior to the Closing shall in all material respects
have been complied with or performed by GDSC.
8.01-3 Blue Oak shall have received a Certificate of GDSC, dated as of
the Closing Date, executed by the President or other authorized officer of GDSC,
to the effect that the representations and warranties of GDSC contained in this
Agreement are in all material respects true and complete on and as of the
Closing Date as though made on and as of the Closing Date and that GDSC has in
all material respects complied with or performed all terms, covenants and
conditions to be complied with or performed by it at or prior to the Closing.
8.02 Adverse Proceedings. No suit, action, claim or governmental proceeding
shall have been instituted or threatened against, and no order, decree or
judgment of any court, agency or other governmental authority shall have been
rendered against, GDSC, Blue Oak or any Partner to restrain or prohibit this
Agreement or the transactions contemplated by this Agreement.
8.03 Opinion of Counsel. Blue Oak shall have received an opinion of Stoel
Rives LLP, counsel to GDSC, dated the Closing Date, in substantially the form
attached as Exhibit I.
8.04 Actions Satisfactory to Blue Oak's Counsel. All actions, proceedings,
instruments and documents required to be carried out by this Agreement, or
incidental hereto, and all other relevant legal matters shall be reasonably
satisfactory to counsel for Blue Oak.
ARTICLE IX
Termination
9.01 Right of Parties to Terminate. This Agreement may be terminated:
9.01-1 by GDSC, if any of the authorizations, consents, approvals,
filings or registrations described in Section 7.01 hereof shall have been
denied, not permitted to go into effect
23
<PAGE>
or obtained on terms not reasonably satisfactory to GDSC and all reasonable
final appeals shall have been exhausted;
9.01-2 by GDSC, if Blue Oak or the Partners shall have breached any of
their obligations hereunder in any material respect;
9.01-3 by Blue Oak, if GDSC shall have breached any of its obligations
hereunder in any material respect; or
9.01-4 by either Blue Oak or GDSC, by written notice to the other
party, if the Closing shall not have occurred on or prior to June 30, 1997;
provided, however, that the right to terminate this Agreement under this Section
9.01-4 shall not be available to any party whose failure to fulfill or perform
any obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date.
9.02 Effect of Termination. If either GDSC or Blue Oak decides to terminate
this Agreement pursuant to Section 9.01, such party shall promptly give written
notice to the other party to this Agreement of such decision. In the event of a
termination pursuant to Section 9.01, the parties hereto shall be released from
all liabilities and obligations arising under this Agreement (other than those
described in Article 11 hereof) with respect to the matters contemplated by this
Agreement, other than for damages arising from a breach of this Agreement.
ARTICLE X
Survival; Indemnification
10.01 Survival. All representations, warranties, covenants and agreements
made in this Agreement or in any schedule, certificate or assignment delivered
in accordance with this Agreement (collectively, the "Related Documents") shall
survive any investigation by or on behalf of any party, the execution and
delivery of this Agreement, the consummation of the transactions contemplated
hereby and any termination or expiration of this Agreement.
10.02 Indemnification by Blue Oak.
10.02-1 Notwithstanding any investigation by GDSC, from and after the
Closing, Blue Oak shall indemnify, hold harmless and, to the extent provided in
Section 10.04-1, defend GDSC, its subsidiaries, shareholders, affiliates,
officers, directors, employees, agents, successors and assigns (collectively,
"GDSC's Indemnified Persons") from and against, and reimburse each of GDSC's
Indemnified Persons with respect to, any and all losses, damages, liabilities,
costs and expenses, including interest from the date of such loss to the time of
payment, penalties and reasonable attorneys' fees (collectively, "Damages")
incurred by any of GDSC's Indemnified Persons by reason of or arising out of or
in connection with:
(a) any breach or inaccuracy of any representation or warranty of
Blue Oak or any Partner made in this Agreement or any Related Document;
24
<PAGE>
(b) any failure by Blue Oak or any Partner to perform any
covenant required to be performed by them pursuant to this Agreement or any
Related Document; or
(c) any liability or obligation of Blue Oak arising out of or in
connection with the ownership, use, condition, maintenance or operation of the
Dental Practice or the Assets by Blue Oak on or prior to the Closing, in either
case not expressly assumed by GDSC in accordance with the terms of this
Agreement, and specifically including any liability to pay cash to a terminated
employee on account of accrued vacation time.
10.02-2 This indemnification extends to any Damages suffered by any of
GDSC's Indemnified Persons, whether or not a claim is made against any of GDSC's
Indemnified Persons by any third party.
10.02-3 Notwithstanding the foregoing, Blue Oak shall not be liable
for indemnity under this Section 10.02 unless a claim for such indemnity is made
within two years after the Closing Date.
10.03 Indemnification by GDSC.
10.03-1 Notwithstanding any investigation by the Blue Oak, from and
after the Closing, GDSC shall indemnify, hold harmless and, to the extent
provided in Section 10.04-1, defend Blue Oak, the Professional Corporation, and
their respective partners, affiliates, officers, employees, agents, successors
and assigns (collectively, "Blue Oak's Indemnified Persons") from and against,
and reimburse each of Blue Oak's Indemnified Persons with respect to, any and
all Damages incurred by any of Blue Oak's Indemnified Persons by reason of or
arising out of or in connection with:
(a) any breach or inaccuracy of any representation or warranty of
GDSC made in this Agreement or any Related Document;
(b) any failure by GDSC to perform any covenant required to be
performed by it pursuant to this Agreement or any Related Document; or
(c) any liability or obligation of Blue Oak to any third party
expressly assumed by GDSC in accordance with the terms of this Agreement.
10.03-2 This indemnification extends to any Damages suffered by any of
Blue Oak's Indemnified Persons whether or not a claim is made against any of
Blue Oak's Indemnified Persons by any third party.
10.03-3 Notwithstanding the foregoing, GDSC shall not be liable for
indemnity under this Section 10.03 unless a claim for such indemnity is made
within two years after the Closing Date.
25
<PAGE>
10.04 Indemnification Procedure.
10.04-1 Third Party Claims.
(a) Each indemnified party shall, with reasonable promptness
after obtaining knowledge thereof, provide any indemnifying party against whom a
claim for indemnification is to be made under this Article 10 with written
notice of all third party actions, suits, proceedings, claims, demands or
assessments that may be subject to the indemnification provisions of this
Article 10 (collectively, "Third Party Claims"), including, in reasonable
detail, the basis for the claim, the nature of Damages and a good faith estimate
of the amount of Damages.
(b) Each indemnifying party shall have 15 days after its receipt
of the claim notice to notify the indemnified party in writing whether the
indemnifying party agrees that the claim is subject to this Article 10 and, if
so, whether the indemnifying party elects, jointly with any other indemnifying
party notified under Section 10.04-1(a), to undertake, conduct and control,
through counsel of its or their choosing (subject to the consent of the
indemnified party, such consent not to be withheld unreasonably) and at its or
their sole risk and expense, the good faith settlement or defense of the Third
Party Claim.
(c) If within 15 days after its receipt of the claim notice an
indemnifying party notifies the indemnified party that it elects to undertake
the good faith settlement or defense of the Third Party Claim, the indemnified
party shall cooperate reasonably with the indemnifying party in connection
therewith including, without limitation, by making available to the indemnifying
party all relevant information material to the defense of the Third Party Claim.
The indemnified party shall be entitled to participate in the settlement or
defense of the Third Party Claim through counsel chosen by the indemnified
party, at its expense, and to approve any proposed settlement that would impose
any obligation or duty on the indemnified party, which approval may, in the sole
discretion of the indemnified party, be withheld. So long as an indemnifying
party is contesting the Third Party Claim in good faith and with reasonable
diligence, the indemnified party shall not pay or settle the Third Party Claim.
Notwithstanding the foregoing, the indemnified party shall have the right to pay
or settle any Third Party Claim at any time, provided that in such event it
waives any right to indemnification therefor by the indemnifying party.
(d) If an indemnifying party does not provide notice that it
elects to undertake the good faith settlement or defense of the Third Party
Claim, or if an indemnifying party fails to contest the Third Party Claim or
undertake or approve settlement, in good faith and with reasonable diligence,
the indemnified party shall thereafter have the right to contest, settle or
compromise the Third Party Claim at its exclusive discretion, at the risk and
expense of the indemnifying party, and the indemnifying party will thereby waive
any claim, defense or argument that the indemnified party's settlement or
defense of such Third Party Claim is in any respect inadequate or unreasonable.
(e) A party's failure to give timely notice will not constitute a
defense, in part or in whole, to any claim for indemnification by such party,
except if, and only to the extent that, such failure results in any material
prejudice to the indemnifying party.
26
<PAGE>
10.04-2 Non-Third Party Claims.
(a) Each indemnified party shall, with reasonable promptness,
deliver to any indemnifying party against whom a claim for indemnification is to
be made under this Article 10 written notice of all claims for indemnification
under this Article 10, other than Third Party Claims, including, in reasonable
detail, the basis for the claim, the nature of Damages and a good faith estimate
of the amount of Damages.
(b) Each indemnifying party shall have 30 days after its receipt
of the claim notice to notify the indemnified party in writing whether the
indemnifying party accepts liability for all or any part of the Damages
described in the claim notice. If the indemnifying party does not so notify the
indemnified party, the indemnifying party shall be deemed to accept liability
for all the Damages described in the claim notice.
(c) A party's failure to give timely notice will not constitute a
defense, in part or in whole, to any claim for indemnification by such party,
except if, and only to the extent that, such failure results in any material
prejudice to the indemnifying party.
10.05 Rights Not Exclusive. An indemnified party's rights to
indemnification under this Article 10 are in addition to, and not in lieu of,
any other rights to which the indemnified party may be entitled at law or in
equity.
ARTICLE XI
Confidentiality; Press Releases
11.01 Confidentiality.
11.01-1 No information concerning Blue Oak not previously disclosed to
the public or in the public domain that has been furnished to or obtained by
GDSC under this Agreement or in connection with the transactions contemplated
hereby shall be disclosed to any person other than in confidence to employees,
legal counsel, financial advisers or independent public accountants of GDSC or
used for any purpose other than as contemplated herein. If the transactions
contemplated by this Agreement are not consummated, GDSC shall hold such
information in confidence for a period of four years from the date of any
termination of this Agreement, and all such information that is in writing or
embodied on a diskette, tape or other tangible medium shall be promptly returned
to Blue Oak.
11.01-2 No information concerning GDSC not previously disclosed to the
public or in the public domain that has been furnished to or obtained by Blue
Oak under this Agreement or in connection with the transactions contemplated
hereby shall be disclosed to any person other than in confidence to the
employees, legal counsel, financial advisers or independent public accountants
of Blue Oak or used for any purpose other than as contemplated herein. If the
transactions contemplated by this Agreement are not consummated, Blue Oak shall
hold such information in confidence for a period of four years from the date of
any termination of this Agreement, and all
27
<PAGE>
such information that is in writing or embodied on a diskette, tape or other
tangible medium shall be promptly returned to GDSC.
11.01-3 Notwithstanding the foregoing, such obligations of GDSC and of
Blue Oak shall not apply to information
(a) that is, or becomes, publicly available from a source other
than GDSC or Blue Oak, as the case may be;
(b) that was known and can be shown to have been known by GDSC at
the time of its receipt from Blue Oak, or by Blue Oak at the time of its receipt
from GDSC, as the case may be;
(c) that is received by GDSC from a third party without breach of
this Agreement by GDSC, or is received by Blue Oak from a third party without
breach of this Agreement by Blue Oak, as the case may be;
(d) that is required by law to be disclosed; or
(e) that is disclosed in accordance with the written consent of
GDSC or of Blue Oak, as the case may be.
11.02 Press Releases. No press releases or other public announcements
concerning the transactions contemplated by this Agreement shall be made by Blue
Oak without the prior written consent of GDSC; provided, however, that nothing
herein shall prevent a party from supplying such information or making
statements as required by governmental authority or in order for a party to
satisfy its legal obligations (prompt notice of which shall in any such case be
given to the other party or parties).
ARTICLE XII
Other Provisions
12.01 Benefit and Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. No party hereto may voluntarily or involuntarily assign such
party's interest under this Agreement without the prior written consent of the
other parties.
12.02 Entire Agreement. This Agreement and the Schedules and Exhibits
referred to herein embody the entire agreement and understanding of the parties
and supersede any and all prior agreements, arrangements and understandings
relating to matters provided for herein.
12.03 Fees and Expenses. GDSC shall be solely responsible for all costs and
expenses incurred by it, and Blue Oak shall be solely responsible for all costs
and expenses incurred by Blue Oak, in connection with the negotiation,
preparation and performance of and compliance with the terms of this Agreement.
28
<PAGE>
12.04 Amendment, Waiver, etc. The provisions of this Agreement may be
amended or waived only by an instrument in writing signed by the party against
which enforcement of such amendment or waiver is sought. Any waiver of any term
or condition of this Agreement or any breach hereof shall not operate as a
waiver of any other such term, condition or breach, and no failure to enforce
any provision hereof shall operate as a waiver of such provision or of any other
provision hereof.
12.05 Headings. The headings are for convenience only and will not control
or affect the meaning or construction of the provisions of this Agreement.
12.06 Governing Law. The construction and performance of this Agreement
will be governed by the laws of the State of Washington (except for the choice
of law provisions thereof).
12.07 Notices. Any notice, demand or request required or permitted to be
given under the provisions of this Agreement shall be in writing; shall be
delivered personally, including by means of telecopy, or mailed by registered or
certified mail, postage prepaid and return receipt requested; shall be deemed
given on the date of personal delivery or on the date set forth on the return
receipt; and shall be delivered or mailed to the addresses or telecopy numbers
set forth on the first page of this Agreement or to such other address as any
party may from time to time direct, with copies to:
In the case of GDSC:
Stoel Rives LLP
900 SW Fifth Avenue, Suite 2300
Portland, OR 97204
Telecopy No.: (503) 220-2480
Attention: Edward L. Epstein
In the case of Blue Oak:
Weintraub Genshlea & Sproul
400 Capitol Mall, 11th Floor
Sacramento, CA 95814
Telecopy No.: (916) 446-1611
Attention: Dee Hartzog
12.08 Breach; Equitable Relief. The parties acknowledge that the Dental
Practice and rights of the parties described in this Agreement are unique and
that money damages alone for breach of this Agreement would be inadequate. Any
party aggrieved by a breach of the provisions hereof may bring an action at law
or suit in equity to obtain redress, including specific performance, injunctive
relief or any other available equitable remedy. Time and strict performance are
of the essence in this Agreement.
29
<PAGE>
12.09 Attorneys' Fees. If suit or action is filed by any party to enforce
the provisions of this Agreement or otherwise with respect to the subject matter
of this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees as fixed by the trial court and, if any appeal is taken from the
decision of the trial court, reasonable attorneys' fees as fixed by the
appellate court. For purposes of this Agreement, the term "prevailing party"
shall be deemed to include a party that successfully opposes a petition for
review filed with an appellate court.
12.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
GDSC: GENTLE DENTAL SERVICE CORPORATION
By: DANY Y. TSE
-------------------------------------
Title: President
----------------------------------
Blue Oak: BLUE OAK DENTAL GROUP
By: MARK E. ARENA
-------------------------------------
Title: General Partner
----------------------------------
The Partners:
MARK E. ARENA
-----------------------------------------
Mark E. Arena
ROBERT H. GADE, JR.
-----------------------------------------
Robert H. Gade, Jr.
MICHAEL D. GADE
-----------------------------------------
Michael D. Gade
A. RANDEL WILKES
-----------------------------------------
A. Randel Wilkes
30
