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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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)
MAY 8, 1996
COMPDENT CORPORATION
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(Exact name of registrant as specified in charter)
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DELAWARE 0-26090 04-3185995
- ---------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)
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8800 ROSWELL ROAD, SUITE 295, ATLANTA, GA 30350
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (770) 998-8936
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Item 2 - Acquisition or Disposition of Assets
On May 8, 1996, American Prepaid Professional Services, Inc. (the
"Company"), a wholly-owned subsidiary of CompDent Corporation (the
"Registrant"), acquired all of the outstanding capital stock and options of
Dental Care Plus Management, Corp. ("Dental Care"). Pursuant to the terms of
the definitive Stock Purchase Agreement, prior to Closing, the sole shareholder
of I.H.C.S., Inc. ("IHCS") contributed all shares in IHCS to Dental Care
causing IHCS to become a wholly-owned subsidiary of Dental Care. The aggregate
purchase price for Dental Care and its wholly-owned subsidiary, IHCS, was $38
million, of which the Company paid approximately $27 million in cash and
assumed approximately $11 million in accrued liabilities.
Dental Care and its subsidiary IHCS are based in Chicago, Illinois and
provide managed dental care services through a network of dental care
providers. Dental Care also acts as a third party administrator and provides
management services to Health Care Systems, a non-profit dental company.
Dental Care provides managed dental care services to more than 500,000 members
primarily in and around Chicago, Illinois. Dental Care had revenues of
approximately $17.1 million for the fiscal year 1995.
The Registrant financed the purchase of Dental Care as well as
satisfaction of the assumed liabilities by drawing down the Registrant's
revolving credit facility.
Item 7 - Financial Statements, Pro Forma Financial Information and Exhibits
At the time of the filing of this Form 8-K, it is impracticable for
the Registrant to provide (a) the required financial information concerning
Dental Care and (b) the pro forma financial information relating to the
acquisition of Dental Care. Such required financial information will be filed
by amendment not later than July 22, 1996, in accordance with Item 7,
paragraphs (a)(4) and (b)(2) of Form 8-K.
Exhibit Name
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2.1 Stock Purchase Agreement dated as of February 28, 1996
(excluding schedules(1)).
____________________
(1) The Registrant agrees to furnish supplementally a copy of the above-
described schedules to the Commission upon request.
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SIGNATURES
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 thereunto duly authorized.
COMPDENT CORPORATION
Date: May 22, 1996 By: /s/ Bruce A. Mitchell
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Bruce A. Mitchell, Esq.
Executive Vice President and
General Counsel
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EXHIBIT INDEX
Exhibit Name Page
- ------- ---- ----
2.1 Stock Purchase Agreement dated as of February 28, 1996 5
(excluding schedules(2)).
____________________
(2) The Registrant agrees to furnish supplementally a copy of the above
- -described schedules to the Commission upon request.
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STOCK PURCHASE AGREEMENT
By and Between
CompDent Corporation
and
American Prepaid Professional Services, Inc.,
and
Theodore Tannebaum,
Sven Philip-Sorensen,
Dental Care Plus Management, Corp.
and
I.H.C.S., Inc.
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TABLE OF CONTENTS
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ARTICLE I. PURCHASE AND SALE OF SHARES, NOTE AND OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.01. Purchase and Sale of Shares, Note and Options . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.02. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.03. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.04. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.05. The Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.06. Non-Competition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.07. IDI Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF MR. TANNEBAUM . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.01. Making of Representations and Warranties; Certain Definitions . . . . . . . . . . . . . . . 5
Section 2.02. Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.03. Authority of Mr. Tannebaum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.04. Organization, Existence and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.05. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.06. Subsidiaries; Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.07. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.08. Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.09. Absence of Certain Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.10. Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.11. Transactions with Related Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.12. Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.13. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.14. Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.15. Intellectual Property Rights; Employee Restrictions . . . . . . . . . . . . . . . . . . . . 14
Section 2.16. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.17. Permits; Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.18. Compliance with Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.19. Labor Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.20. OMITTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.21. Investment Banking; Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.22. Employee Benefit Programs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.23. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.24. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.25. Relationship with Customers and Providers . . . . . . . . . . . . . . . . . . . . . . . . . 21
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ARTICLE III. REPRESENTATIONS, WARRANTIES AND COVENANTS OF MR.
PHILIP-SORENSEN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.01. Making of Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . 21
Section 3.02. Title to Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.03. Authority of Mr. Philip-Sorensen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.04. Exercise of the Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.05. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.06. General Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.07. Confirmation of Representations and Warranties of the Companies . . . . . . . . . . . . . . 23
Section 3.08. Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.09. Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.10. No Transfer of the Options; Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF COMPDENT AND AMERICAN PREPAID . . . . . . . . . . . . . . . . . . 24
Section 4.01. Making of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.02. Organization and Corporate Power. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.03. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.04. Investment Banking; Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.05. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.06. Investment Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.07. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE V. COVENANTS OF THE COMPANIES AND MR. TANNEBAUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.01. Making of Covenants and Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.02. Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.03. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.04. Certain Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.05. Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.06. Transfers of Shares; Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.07. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.08. Certain Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.09. Credit Line Paydown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.10. Consulting Agreement Terminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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ARTICLE VI. COVENANTS OF COMPDENT AND AMERICAN PREPAID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.01. Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.02. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 6.03. Non-Hire of the Companies' Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 6.04. Companies' By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 6.05. Consulting Buy-Outs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VII. CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.01. Conditions to the Obligations of CompDent and American Prepaid . . . . . . . . . . . . . . 35
Section 7.02. Conditions to the Obligations of the Sellers . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VIII. TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.01. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.02. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.03. Right to Proceed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE IX. SURVIVAL; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.01. Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.02. Indemnification by Mr. Tannebaum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.03. Limitations on Indemnification by the Sellers . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.04. Indemnification by CompDent and American Prepaid . . . . . . . . . . . . . . . . . . . . . 45
Section 9.05. Limitations on Indemnification by CompDent and American Prepaid . . . . . . . . . . . . . . 46
Section 9.06. Notice; Defense of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.07. Tax Effects of Losses; Meaning of After-Tax Basis . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE X. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.01. Law Governing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.03. Prior Agreements Superseded. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.04. Assignability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.05. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 10.06. Publicity and Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 10.07. Captions and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 10.08. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 10.09. Certain Remedies; Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
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Section 10.10. Amendments; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 10.11. Consent to Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 10.12. Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.13. Section 338(h)(10) Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.14. CompDent Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.15. IHCS Liability Limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
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SCHEDULES
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Schedule 1.06 - Non-Competition Agreement
Schedule 2.01(a) - "Knowledge" Definition
Schedule 3.06 - Mr. Philip-Sorensen's General Release
Schedule 4.02 - CompDent Transaction Documents
Schedule 4.03 - CompDent and American Prepaid Consents and Approvals
Schedule 5.08 - Mr. Tannebaum's General Release
Schedule 6.05 - Buy-Out Obligations
Schedule 7.01(b) - Legal Opinion of Counsel for the Sellers
Schedule 7.02(b) - Legal Opinion of Counsel for American Prepaid
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is made as of this 28th day of February,
1996, by and between CompDent Corporation, a Delaware corporation ("CompDent"),
and American Prepaid Professional Services, Inc., a Florida corporation
("American Prepaid"), and Theodore Tannebaum ("Mr. Tannebaum"), Sven
Philip-Sorensen ("Mr. Philip-Sorensen") (Mr. Tannebaum and Mr. Philip-Sorensen
are sometimes referred to herein individually as a "Seller" and collectively as
the "Sellers"), Dental Care Plus Management, Corp., an Illinois corporation
("Dental Care"), and I.H.C.S., Inc., an Illinois corporation ("IHCS"). Dental
Care and IHCS are sometimes referred to together herein as the "Companies."
W I T N E S S E T H
WHEREAS, Mr. Tannebaum is the record and beneficial owner of (i) 1,000
common shares (the "Tannebaum Dental Care Shares"), no par value per share
("Dental Care Common Stock"), of Dental Care and (ii) 1,000 common shares (the
"Tannebaum IHCS Shares"), par value $100.00 per share ("IHCS Common Stock"), of
IHCS (the Tannebaum Dental Care Shares and the Tannebaum IHCS Shares are
referred to herein collectively as the "Shares" except that references to the
"Shares" shall mean Tannebaum Dental Care Shares from and after the
contribution of the Tannebaum IHCS Shares to Dental Care by Mr. Tannebaum as
provided in Sections 5.11 and 7.01(q)), certain of which are subject to the
Options (as hereinafter defined);
WHEREAS, Mr. Philip-Sorensen is the record and beneficial owner of
options to purchase one-half of the shares of Dental Care Common Stock and
one-half of the shares of IHCS Common Stock held by Mr. Tannebaum (the
"Options") such that immediately after exercise of all of the Options Mr.
Philip-Sorensen would hold 50% of the issued and outstanding capital stock of
each of the Companies;
WHEREAS, the Shares represent all of the issued and outstanding
capital stock of the Companies and the Options represent all of the issued and
outstanding securities convertible into or exchangeable for any shares of
capital stock of the Companies; and
WHEREAS, subject to the terms and conditions set forth herein, Mr.
Tannebaum desires to sell to American Prepaid, and American Prepaid desires to
purchase from Mr. Tannebaum, the Shares and a certain subordinated surplus
promissory note referred to in Section 1.01 hereof, and Mr. Philip-Sorensen
desires to sell to American Prepaid, and American Prepaid desires to purchase
from Mr. Philip-Sorensen, the Options; and
WHEREAS, Messrs. Tannebaum and Philip-Sorensen are willing to provide
to each of the Companies their general releases as set forth in Sections 3.06
and 5.08 below, and Mr. Tannebaum is willing to agree not to compete with the
Companies, as set forth in Section 1.06 below; and
<PAGE> 8
WHEREAS, in exchange for the foregoing benefits and consideration to
the Companies, the Companies are willing to make the representations,
warranties and agreements to CompDent and American Prepaid contained herein;
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I. PURCHASE AND SALE OF SHARES, NOTE AND OPTIONS
Section 1.01 . Purchase and Sale of Shares, Note and Options.
Subject to the terms and conditions of this Agreement and in reliance on the
representations, warranties and covenants herein set forth, American Prepaid
hereby agrees to purchase (a) the Shares and that certain Subordinated Surplus
Note dated June 1, 1994 in the principal amount of $50,000 payable by IHCS in
favor of Mr. Tannebaum (the "IHCS Note") (including all interest accrued
through the Closing Date) and (b) the Options, and Mr. Tannebaum and Mr.
Philip-Sorensen hereby agree to sell to American Prepaid, at the Closing (as
hereinafter defined in Section 1.03 hereof), the Shares and the IHCS Note and
the Options, respectively, free and clear of any and all liens, claims,
options, charges, pledges, security interests, voting agreements, trusts,
encumbrances, rights or restrictions of any nature ("Claims"). At the Closing,
Mr. Tannebaum shall deliver or cause to be delivered to American Prepaid stock
certificates representing all of the Shares and the IHCS Note. Such stock
certificates shall be duly endorsed in blank for transfer or shall be presented
with stock powers duly executed in blank, together with such other documents,
if any, as may be required by American Prepaid to effect a valid transfer to
American Prepaid of the Shares and the IHCS Note, free and clear of any and all
Claims (other than the Options). At the Closing, Mr. Philip-Sorensen shall
deliver an assignment of the Options to American Prepaid, free and clear of any
and all Claims, together with the other documents elsewhere specified in this
Agreement.
Section 1.02. Purchase Price. In consideration of the sale by the
Sellers to American Prepaid of the Shares, the IHCS Note and the Options and
subject to the satisfaction of all of the conditions contained herein, American
Prepaid shall pay (or cause to be paid) to the Sellers, at the Closing, cash in
an aggregate amount equal to the sum of (a) Twenty-Seven Million Three Hundred
Forty-Five Thousand Dollars ($27,345,000) plus (b) the excess of $10,535,000
over the amount of the Buy-Out Obligations (as defined in Section 6.05) on the
date of the Closings (as hereinafter defined). The foregoing payment to the
Sellers shall be allocated between them, in the ratio of 50% to each, by wire
transfer of immediately available funds to accounts of the Sellers, written
notice of which accounts shall have been provided to American Prepaid not less
than two (2) business days prior to the Closing.
Section 1.03. Closing. The sale and delivery and the purchase and
acceptance of the Shares, the IHCS Note and the Options (the "Closing") shall
take place at the Chicago offices of Hopkins & Sutter on the date which is
twenty (20) days (or fewer days by agreement of
2
<PAGE> 9
CompDent, American Prepaid and the Representative (as defined in Section 1.05))
following the first day on which all of the conditions to Closing set forth in
Sections 7.01(d)(i) and 7.02(d) (as to IDI Approval) and Sections 7.01(j) and
7.02(f) have been satisfied provided, however, that the Closing shall not occur
before April 1, 1996. Notwithstanding anything in Article VIII to the
contrary, in the event all conditions to Closing have been satisfied or waived
on or prior to the applicable termination date specified therein, then no party
shall be entitled to exercise its right of termination as contemplated therein
by reason of the fact that this Section 1.03 contemplates that the Closing
shall occur as promptly as practicable and in no event more than twenty (20)
days after satisfaction of certain conditions as provided in the preceding
sentence, such provision being included for the convenience of the parties and
their counsel in connection with the Closing. The date of the Closing is
referred to herein as the "Closing Date."
Section 1.04. Further Assurances. Each of the Sellers from time to
time after the Closing at the request of American Prepaid and without further
consideration shall execute and deliver further instruments of transfer and
assignment and take such other action as American Prepaid may reasonably
require to more effectively transfer and assign to, and vest in, American
Prepaid the Shares, the IHCS Note and the Options free and clear of any and all
Claims and all rights thereto, and to fully implement the provisions of this
Agreement.
Section 1.05. The Representative.
(a) By the execution and delivery of this Agreement, Mr.
Philip-Sorensen hereby irrevocably constitutes and appoints Mr. Tannebaum as
his true and lawful agent and attorney-in-fact (the "Representative"), with
full power of substitution to act in Mr. Philip-Sorensen's name, place and
stead with respect to all transactions contemplated by and all terms and
provisions of this Agreement, and to act on Mr. Philip-Sorensen's behalf in any
dispute involving this Agreement, and to do or refrain from doing all such
further acts and things, and execute all such documents as the Representative
shall deem necessary or appropriate in connection with the transactions
contemplated by this Agreement, in all events in the Representative's sole and
absolute discretion, including, without limitation, the power:
(i) to waive any condition to the obligations of
the Sellers to consummate the transactions contemplated by this
Agreement;
(ii) to act for Mr. Philip-Sorensen with regard to
matters pertaining to indemnification referred to in this Agreement,
including the power to compromise any claim on behalf of Mr.
Philip-Sorensen and to transact matters of litigation;
(iii) to execute and deliver all ancillary
agreements, certificates and documents, and to make representations
and warranties therein, on behalf of Mr. Philip-Sorensen in connection
with the consummation of the transactions contemplated by this
Agreement;
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(iv) to do or refrain from doing any further act
or deed on behalf of Mr. Philip-Sorensen relating to the subject
matter of this Agreement, as fully and completely as Mr.
Philip-Sorensen could do if personally present; and
(v) to receive all notices on behalf of Mr.
Philip-Sorensen in connection with any claims or matters under this
Agreement.
(b) The appointment of the Representative shall be deemed
coupled with an interest and shall be irrevocable, and CompDent, American
Prepaid and any other person may conclusively and absolutely rely, without
inquiry, upon any action of the Representative on behalf of Mr. Philip-Sorensen
in all matters referred to herein. All notices delivered by CompDent or
American Prepaid or the Companies (following the Closing) to the Representative
(whether pursuant hereto or otherwise) for the benefit of the Sellers shall
constitute notice to Mr. Philip-Sorensen.
(c) All actions, decisions and instructions of the
Representative taken, made or given pursuant to the authority granted to the
Representative pursuant to paragraph (a) above shall be conclusive and binding
upon Mr. Philip-Sorensen and Mr. Philip-Sorensen shall not have the right to
object, dissent, protest or otherwise contest the same.
(d) The provisions of this Section 1.05 are independent
and severable, shall constitute an irrevocable power of attorney, coupled with
an interest surviving death or disability of Mr. Philip-Sorensen, granted by
Mr. Philip-Sorensen to the Representative and shall be binding upon the
executors, heirs, legal representatives, successors and assigns of Mr.
Philip-Sorensen.
(e) CompDent, American Prepaid and the Companies
(following the Closing) shall be entitled to rely conclusively on the
instructions and decisions of the Representative as to any actions required or
permitted to be taken by the Sellers or the Representative hereunder, and no
party hereunder shall have any cause of action against CompDent or American
Prepaid for any action taken in good faith by CompDent, American Prepaid or the
Companies (following the Closing) by any of them in reliance upon the
instructions or decisions of the Representative.
Section 1.06. Non-Competition Agreement. As a material inducement
to and a condition precedent of American Prepaid's purchase of the Shares and
the IHCS Note, and associated goodwill, and in consideration of a cash payment
by wire transfer of immediately available funds in the amount of $10,000 at the
Closing, Mr. Tannebaum shall execute and deliver on the Closing Date a
Non-Competition Agreement in the form of Schedule 1.06 attached hereto (the
"Non-Competition Agreement").
Section 1.07. IDI Approval. Notwithstanding anything to the
contrary elsewhere contained in this Agreement, the obligations of the parties
to close the purchase and sale of the
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Shares, the IHCS Note and Options hereunder are subject to the written
approval or consent of the change of control of IHCS contemplated by
this Agreement being issued by the Department of Insurance of the
State of Illinois on or prior to August 31, 1996. No party may waive
this condition or consummate such purchase and sale until and unless
such approval or consent is issued. The provisions of this Section
1.07 shall not be construed to limit, restrict or abrogate any of the
parties' agreements set forth herein, including without limitation,
the purchase and sale of the Shares, the IHCS Note and Options
following receipt of such approval or consent, subject to the terms
and conditions of this Agreement, and those under Sections 3.09 and
5.05, which shall be performed in accordance with their terms.
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF MR. TANNEBAUM AND THE
COMPANIES
Section 2.01. Making of Representations and Warranties; Certain Definitions.
(a) As a material inducement to CompDent and American
Prepaid to enter into this Agreement and consummate the transactions
contemplated hereby, Mr. Tannebaum hereby makes to CompDent and American
Prepaid the representations and warranties contained in Sections 2.02 and 2.03,
and each of the Companies hereby makes to CompDent and American Prepaid the
representations and warranties contained in Section 2.04 through 2.25 with
respect to itself but not with respect to the other Company. For purposes of
this Agreement, references to the "knowledge" or "best knowledge" of Mr.
Tannebaum or words of similar meaning shall be deemed to refer to actual (but
not constructive) knowledge without having undertaken any investigation, and
references to the "knowledge" or "best knowledge" of the Companies or words of
similar meaning shall be deemed to refer to the actual (but not constructive)
knowledge of, any executive officers of the Companies listed on Schedule
2.01(a) attached hereto including actual knowledge obtained following the
inquiries described therein. Mr. Tannebaum advises CompDent and American
Prepaid that he has not been substantially involved in the operations of the
Companies and so lacks specific knowledge of many of the statements made by the
Companies below, provided, however, that the foregoing statement shall not be
construed as limiting or restricting any of the representations made by either
of the Companies herein or Mr. Tannebaum's obligations under Section 9.02 in
the event of any breach thereof.
(b) For purposes of this Agreement, (i) references to a
"Person" or "person" shall mean an individual, a corporation, an association,
an estate, a trust, a partnership or any other entity or organization; (ii)
references to the defined term "Material Adverse Effect" shall mean a material
adverse effect on the properties, assets, business, financial condition or
results of operations of the Companies; (iii) references to "Disclosure
Schedule" shall mean the disclosure schedule delivered by the Companies under
this Agreement; and (iv) references to a "Subsidiary" shall mean, with respect
to any Person, any corporation more than 50% of the
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outstanding voting securities of which, or any partnership, joint venture or
other entity more than 50% of the total equity interest of which, is directly
or indirectly owned by such Person.
Section 2.02. Ownership. Mr. Tannebaum owns beneficially and of
record all of the Shares and the IHCS Note, free and clear of any and all
Claims, other than the Options and the restrictions shown in Section 2.03/2.05
of the Disclosure Schedule. Upon delivery to American Prepaid at the Closing
of the certificates representing the Shares owned by Mr. Tannebaum duly
endorsed in blank for transfer or with stock powers attached duly executed in
blank, and the IHCS Note, against delivery of the purchase price therefor, good
and valid title thereto shall be transferred to American Prepaid, free and
clear of any and all Claims.
Section 2.03. Authority of Mr. Tannebaum.
(a) Subject to Section 1.07 of this Agreement, Mr.
Tannebaum has full authority, power and capacity to enter into this Agreement
and the other agreements listed in Section 2.03/2.05 of the Disclosure Schedule
(the "Tannebaum Transaction Documents") and perform his obligations under this
Agreement and the Tannebaum Transaction Documents. This Agreement and the
Tannebaum Transaction Documents constitute, or when executed and delivered by
him will constitute, valid and binding obligations of Mr. Tannebaum enforceable
in accordance with their respective terms.
(b) The execution, delivery and performance by Mr.
Tannebaum of this Agreement and each of the Tannebaum Transaction Documents do
not and will not violate any laws, rules or regulations of the United States or
any state or other jurisdiction applicable to Mr. Tannebaum, or require him to
obtain any approval, consent or waiver of, or to make any filing with, any
Person (governmental or otherwise) that has not been obtained or made, except
as set forth in Section 2.03/2.05 of the Disclosure Schedule, and except where
failure to obtain such approval, consent or waiver would not have a Material
Adverse Effect.
Section 2.04. Organization, Existence and Authority.
(a) Each of the Companies is a corporation organized,
validly existing and in good standing under the laws of the state or other
jurisdiction of its incorporation, and is duly qualified or registered as a
foreign corporation in each jurisdiction (i) listed in Section 2.04(a) of the
Disclosure Schedule or (ii) in which it is required to be licensed or qualified
to conduct its businesses or own its properties, except where the failure to so
qualify or register would not have a Material Adverse Effect. Each of the
Companies has all requisite corporate power and authority and, except as
disclosed in Section 2.04(a) of the Disclosure Schedule, has all material and
necessary authorizations, approvals, orders, licenses, certificates and
permits, to conduct its businesses as presently conducted. True and complete
copies of the charter and by-laws of each of the Companies have previously been
delivered to CompDent and American Prepaid.
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(b) Each of the Companies has full corporate power and
authority to enter into this Agreement and the other agreements listed in
Section 2.04(b) of the Disclosure Schedule (the "Company Transaction
Documents") and to carry out the transactions contemplated hereby and thereby.
This Agreement and each Company Transaction Document constitute, or when
executed and delivered by such Company will constitute, valid and binding
obligations of such Company enforceable in accordance with their respective
terms. The execution, delivery and performance by the Sellers and Companies of
this Agreement, and each of the Tannebaum Transaction Documents, the
Philip-Sorensen Transaction Documents (as defined in Section 3.03(a)) and the
Company Transaction Documents:
(i) do not and will not violate the charter or
by-laws of either of the Companies or any laws, rules or regulations
of the United States or any state or other jurisdiction applicable to
either of the Companies, or require either of the Companies to obtain
any approval, consent or waiver of, or to make any filing with, any
Person (governmental or otherwise) that has not been obtained or made,
except where failure to obtain such approval, consent or waiver would
not have a Material Adverse Effect or except as set forth in Section
2.03/2.05 of the Disclosure Schedule; and
(ii) do not and will not result in a breach of,
constitute a default under, accelerate any obligation under or give
rise to a right of termination of any indenture or loan or credit
agreement or any other agreement, contract, instrument, mortgage,
lien, lease, permit, authorization, order, writ, judgment, injunction,
decree, determination or arbitration award to which either of the
Companies is a party or by which the property of either of the
Companies is bound, or result in the creation or imposition of any
mortgage, pledge, lien, security interest or other charge or
encumbrance on any of assets or properties of either of the Companies,
except for any such default, acceleration, termination, imposition or
creation that would not have a Material Adverse Effect or except as
disclosed in Sections 2.03/2.05 of the Disclosure Schedule.
Section 2.05. Capitalization. The total authorized capital stock
of Dental Care consists of 10,000 shares of Dental Care Common Stock. As of
the date hereof, 1,000 shares of Dental Care Common Stock are issued and
outstanding, all of which are duly and validly issued, fully paid and
nonassessable and are owned beneficially (subject to the Options) and of record
by Mr. Tannebaum. No shares of capital stock of Dental Care are held in the
treasury of Dental Care. No shares of Dental Care Common Stock are reserved
for issuance upon exercise of and pursuant to outstanding options. The total
authorized capital stock of IHCS consists of 1,000 shares of IHCS Common Stock.
As of the date hereof, 1,000 shares of IHCS Common Stock are issued and
outstanding, all of which are duly and validly issued, fully paid and
nonassessable and are owned beneficially (subject to the Options) and of record
by Mr. Tannebaum. No shares of capital stock of IHCS are held in the treasury
of IHCS. No shares of IHCS Common Stock are reserved for issuance upon
exercise of and pursuant to outstanding options. Except as set forth in
Section 2.05 of the Disclosure Schedule, (i) there are no
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outstanding subscriptions, options, warrants, commitments, agreements,
arrangements or commitments of any kind for or relating to the issuance, or
sale of, or outstanding securities convertible into or exchangeable for, any
shares of capital stock of any class or other equity interests of either of the
Companies (other than the Options); (ii) no person has any preemptive right,
right of first refusal or similar right to acquire the Shares or any other
shares of capital stock of either of the Companies; (iii) there are no
restrictions on the transfer of any shares of capital stock of either of the
Companies, other than those imposed by relevant state and federal securities
laws, state insurance or limited health service organization laws, this
Agreement or the Options; (iv) no person has any right to cause either of the
Companies to effect the registration under the Securities Act of 1933, as
amended, of any shares of its capital stock or any other securities (including
debt securities); (v) none of the Companies has an obligation to purchase,
redeem or otherwise acquire any of its equity securities or any interests
therein, or to pay any dividend or make any other distribution in respect
thereof; and (vi) there are no voting trusts, stockholders' agreements, or
proxies relating to any securities of either of the Companies.
Section 2.06. Subsidiaries; Investments. Neither of the Companies
has any Subsidiaries or has any direct interest in or control over any
corporation, partnership, joint venture or other entity of any kind.
Section 2.07. Financial Statements. Included in Section 2.07 of
the Disclosure Schedule are the following financial statements of the
Companies, all of which statements (including the footnotes and schedules
thereto in the case of audited statements) were prepared in accordance with
generally accepted accounting principles, consistently applied during the
periods covered thereby, and fairly present the financial position of each of
the Companies, respectively, on the dates of such statements and their
respective results of operations for the periods covered thereby: audited
balance sheets as at December 31, 1994 and December 31, 1995 and the related
statements of operations and cash flows for the respective fiscal years then
ended, in each case certified by the independent certified public accountants
of each of the Companies. Subject to the matters disclosed in Section 2.07 of
the Disclosure Schedule, the financial condition and liquidity of the Companies
as of December 31, 1995 satisfied all minimum capital or surplus and similar
requirements under applicable laws, rules and regulations of the State of
Illinois.
Section 2.08. Absence of Undisclosed Liabilities. Except as
disclosed in Section 2.08 of the Disclosure Schedule and except to the extent
reflected or disclosed or reserved against in the balance sheets of the
Companies as of December 31, 1995 included in Section 2.07 of the Disclosure
Schedule, including the footnotes thereto (the "Base Balance Sheet"), neither
of the Companies has any other liabilities of any nature, whether accrued,
absolute, known or unknown, contingent or otherwise, except liabilities
incurred in the ordinary course of business since the date of the Base Balance
Sheet.
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Section 2.09. Absence of Certain Developments. Since the date of
the Base Balance Sheet and except as disclosed in Section 2.09 of the
Disclosure Schedule, each of the Companies has conducted its business only in
the ordinary course consistent with past practice and except as set forth in
Section 2.09 of the Disclosure Schedule, there has been: (i) no change in the
financial condition of either of the Companies or in the assets, liabilities,
properties or business of either of the Companies which change, whether or not
arising in the ordinary course of business, has had a Material Adverse Effect;
(ii) no mortgage, encumbrance or lien placed on any of the properties of either
of the Companies; (iii) except for the IHCS Tax Distribution (as defined in
Section 7.01(m)) and the dividend described in Section 5.03 of the Disclosure
Schedule, no declaration, setting aside or payment of any dividend or other
distribution with respect to, or any direct or indirect redemption or
acquisition of, any shares of any capital stock of any class of either of the
Companies or any options, warrants or other rights to acquire, or securities
convertible into or exchangeable for, any such capital stock; (iv) no waiver of
any valuable right of, or cancellation of any debt or claim held by, either of
the Companies; (v) no incurrence or modification of any material contingent
liability with respect to the obligations of others, and no incurrence or
modification of any other contingent or fixed obligations or liabilities except
in the ordinary course of business consistent with past practice; (vi) no
increase, direct or indirect, in the compensation paid or payable to any
officer, director, employee, dental care provider, sales agent or stockholder
other than increases in the ordinary course of business consistent with past
practice permitted under Section 5.03(f); (vii) no material loss, destruction
or damage to any property of either of the Companies, whether or not insured;
(viii) no notice of any claim of unfair labor practices or labor dispute or
work stoppage involving either of the Companies and no change in senior
personnel of either of the Companies; (ix) no acquisition or disposition of any
assets (or any contract or arrangement therefor) nor any other transaction by
either Company other than in the ordinary course of business; (x) no payment or
discharge of a material lien or liability of either Company which is not
recorded in the latest balance sheet included in Section 2.07 of the Disclosure
Schedule; (xi) no employment or consulting agreements entered into by either
Company and no obligation or liability incurred by either Company to any of
their respective officers, directors, consultants, stockholder or employees, or
any loans or advances made by either Company to any of their respective
officers, directors, stockholders or employees, except normal compensation and
expense allowances payable to officers or employees as permitted under Section
5.03(f) and except for changes to or additional consulting agreements in the
ordinary course of business which in the aggregate are not material in terms of
amounts to be paid thereunder; (xii) no change in accounting methods or
practices, credit practices or collection policies used by either Company; and
(xiii) no agreement or understanding whether in writing or otherwise to take
any of the actions specified in paragraphs (i) through (xii) above.
Section 2.10. Accounts Receivable. The customer accounts
receivable of each of the Companies shown in the Base Balance Sheets represent
payments due from customers for capitation or services provided or to be
provided to individual customers or members of customer groups in the ordinary
course of business. Except as set forth in Section 2.10 of the Disclosure
Schedule, such accounts are not, to the best knowledge of the Companies,
subject to
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any material set-off or counterclaim, although adjustments in customer accounts
occur in the ordinary course of business based on additions and deletions of
enrolled members and changes in capitation lists for panel dentists. Sellers
and the Companies make no representation or warranty as to the collectibility
of such accounts or to the effect that they will in fact be collected. Neither
of the Companies has any accounts receivable from any of its or the other
Company's directors, officers, employees or stockholders except as shown in the
Base Balance Sheet.
Section 2.11. Transactions with Related Parties. Except as set
forth in Section 2.11 of the Disclosure Schedule, there are no loans, leases or
other continuing transactions between either of the Companies and any present
or, to the best knowledge of the Companies, former stockholder, director or
officer of either of the Companies, or, to the best knowledge of the Companies,
any member of such officer's, director's or stockholder's immediate family, or
any business organization controlled by such officer, director or stockholder
or his or her immediate family. Except as set forth in Section 2.11 of the
Disclosure Schedule, no stockholder, director or officer of either of the
Companies, or any of the respective spouses or immediate family members, owns
directly or indirectly on an individual or joint basis any material interest
in, or serves as an officer or director or in another similar capacity of, any
competitor or supplier of either of the Companies.
Section 2.12. Title to Properties. Except as set forth in Section
2.12 of the Disclosure Schedule or disclosed in the Base Balance Sheet, each of
the Companies owns all of its material properties and assets reflected on the
Base Balance Sheet or acquired thereafter, free and clear of all mortgages,
security interests, liens, restrictions or encumbrances or other Claims. All
equipment included in such properties which is necessary to the business of
either of the Companies is generally in good condition and repair (ordinary
wear and tear excepted) and all leases of real or personal property to which
either of the Companies is a party are, to the best knowledge of the Companies,
fully effective and afford Dental Care or IHCS, as the case may be, possession
of the subject matter of the lease. To the best knowledge of the Companies,
neither of the Companies is in violation of any zoning, building or safety
ordinance, regulation or requirement or other law or regulation applicable to
the operation of its owned or leased properties, except such violations that
are not reasonably likely to have a Material Adverse Effect. Neither of the
Companies holds title to any real property, and no representation is made as to
compliance of buildings or property parts of which are leased to the Companies
with respect to zoning, building, safety, or other laws, regulations or
ordinances.
Section 2.13. Tax Matters.
(a) Each of the Companies has filed all federal, state,
local and foreign tax returns required to be filed by it through the date on
which this representation is made or deemed made in the certificate delivered
pursuant to Section 7.01, and has paid or caused to be paid all federal, state,
local, foreign, and other taxes, including without limitation income taxes,
estimated taxes, excise taxes, sales taxes, use taxes, premium taxes, gross
receipts taxes,
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franchise taxes, employment and payroll-related taxes, withholding taxes, stamp
taxes, transfer taxes, and property taxes, whether or not measured in whole or
in part by net income, and including without limitation additions to tax,
penalties and interest relating to the foregoing (collectively, "Taxes"),
required to be paid by each of them through the date on which this
representation is made or deemed made in the certificate delivered pursuant to
Section 7.01 whether disputed or not except Taxes which have not yet accrued or
otherwise become due, for which adequate provision has been made in the
pertinent financial statements referred to in Section 2.07 above as of December
31, 1995, for Taxes payable with respect to periods ending on or before such
date, and in the Closing Date Pro Forma Balance Sheet (as defined in Section
7.01(m) hereof, for Taxes payable with respect to periods ending on or before
the Closing Date. Except as disclosed in Section 2.13 of the Disclosure
Schedule, the provisions for Taxes, if any, on the Base Balance Sheet are
sufficient as of such date for the payment of all then-accrued and unpaid Taxes
of any nature of either of the Companies payable with respect to periods ending
on or before December 31, 1995, as the case may be, and any applicable Taxes
then owing by either of the Companies to any foreign jurisdiction, whether or
not assessed or disputed. All Taxes and other assessments and levies which
either of the Companies is required to withhold or collect have been withheld
and collected and have been paid over to the proper governmental authorities
except where the failure to withhold or collect and pay over would not be
reasonably likely to have a Material Adverse Effect or where payment is not yet
due. Neither the Internal Revenue Service nor any other governmental authority
is now asserting or, to the best knowledge of the Companies, threatening to
assert against either of the Companies any deficiency or claim for additional
Taxes. Except as set forth in Section 2.13 of the Disclosure Schedule, since
July 1, 1994 there has not been any audit of any tax return filed by either of
the Companies and the Companies to not know of any audit prior to that date.
Except as set forth in Section 2.13 of the Disclosure Schedule, no waiver or
agreement by either of the Companies is in force for the extension of time for
the assessment or payment of any Taxes. Since July 1, 1994, no claim has been
made by an authority in a jurisdiction where either of the Companies does not
file tax returns that either of them is or may be subject to taxation by that
jurisdiction, and the Companies do not know of any such claim prior to that
date. There are no security interests on any of the assets of either of the
Companies that arose in connection with any failure (or alleged failure) to pay
any Tax.
(b) The foregoing notwithstanding, the Companies make no
representation or warranty with respect to (i) the amount of any net operating
loss deduction reflected on any tax return or any deferred tax asset reflected
on any balance sheet prepared with respect to the Companies or (ii) the ability
of CompDent or American Prepaid or any affiliate (including the Companies) to
utilize such net operating loss deduction or realize any tax benefit with
respect to such deferred tax asset.
(c) Section 2.13 of the Disclosure Schedule lists all
federal, state, local, and foreign income tax returns (including all schedules
and attachments) filed with respect to each of the Companies for taxable
periods ended on or after December 31, 1994, and to the best knowledge of the
Companies, since December 31, 1992. Each of the Companies has delivered
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to American Prepaid correct and complete copies of all federal income tax
returns, examination reports, and statements of deficiencies assessed against
or agreed to by such Company since December 31, 1994, and to the best knowledge
of the Companies, since December 31, 1992.
(d) Except as disclosed in Section 2.13 of the Disclosure
Schedule, neither of the Companies has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) Neither of the Companies has filed a consent under
Section 341(f) of the Internal Revenue Code concerning collapsible corporations
since July 1, 1994, and to the best knowledge of the Companies, since
incorporation. Neither of the Companies has made any payments, is obligated to
make any payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be
deductible under Section 280G of the Internal Revenue Code (the "Code").
Neither of the Companies nor any of their respective Subsidiaries has been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. Each of the Companies has disclosed on its
respective federal income tax returns for periods ending December 31, 1994 and
thereafter and, to the best knowledge of the Companies, for periods ended
December 31, 1992, and thereafter, all positions taken therein that could give
rise to a substantial understatement of federal income tax within the meaning
of Section 6662 of the Code. Neither of the Companies is a party to any tax
allocation or sharing agreement to the best knowledge of the Companies.
Neither of the Companies (A) has been a member of an affiliated group filing a
consolidated federal income tax return or (B) has any liability for the Taxes
of any other Person under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract or otherwise since July 1, 1994, and to the best knowledge of the
Companies, since incorporation.
Section 2.14. Contracts and Commitments.
(a) Except as set forth in Section 2.14(a) of the
Disclosure Schedule, neither of the Companies is a party to or is otherwise
bound by any (i) employment contracts; (ii) stock redemption or purchase
agreements; (iii) agreements providing for the indemnification of others
against any liabilities; (iv) license agreements (as licensor or licensee); (v)
distributor or sales representative agreements or similar agreements with any
Person (including without limitation employees, marketing directors or other
outside parties) which provide for payment in whole or in part based on the
revenue or net income of the Companies or amounts collectible from members in
their dental plans or other products; (vi) agreements with officers, directors,
employees or stockholders of either of the Companies; (vii) leases of real
property; (viii) material agreements with customers of either of the Companies;
(ix) plans or contracts providing for bonuses, pensions, options, stock
purchases, deferred compensation, retirement payments, profit sharing,
collective bargaining or the like, or any contract or agreement with any labor
union; (x) agreements for the purchase of any commodity, material or equipment
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except purchase orders in the ordinary course of business consistent with past
practice; (xi) agreements containing covenants limiting the freedom of either
of the Companies to compete in any line of business or territory or with any
person or entity; (xii) indentures, mortgages, promissory notes, loan
agreements, guaranties or other agreements or commitments for the borrowing of
money or any related security agreements; (xiii) any partnership, trust
agreement, joint venture, or other similar contract, arrangement or agreement;
(xiv) any registration rights agreements, warrants, warrant agreements or other
rights to subscribe for securities, any voting agreements, voting trusts,
shareholder agreements or other similar arrangements or any stock purchase or
repurchase agreements or stock restriction agreements; or (xv) any other
agreement, contract or commitment which (A) provides for or involves payments
by or imposes any liability or obligation on either of the Companies in excess
of $25,000 per month to any panel dentist, $10,000 per month to any agent, or
$25,000 per annum or $50,000 in the aggregate during the term of the agreement
to any other Person or (B) provides for receipt by or creates any claim or
right of either of the Companies in excess of 1% of the gross annual revenue of
such Company.
(b) Except as set forth in Section 2.14(b) of the
Disclosure Schedule, there is no pending or, to the best knowledge of the
Companies, threatened termination or modification of any lease, loan agreement,
dental services customer contract or any other agreement listed in Section
2.14(a) of the Disclosure Schedule, which termination, or modification is
reasonably likely to have a Material Adverse Effect. Except as set forth in
Section 2.14(b) of the Disclosure Schedule, neither of the Companies, nor, to
the best knowledge of the Companies, any other party to any lease, loan
agreement, dental services customer contract or any other agreement listed in
Section 2.14(a) of the Disclosure Schedule, is in default in complying with any
provisions thereof, and, to the best knowledge of the Companies, no condition
or event or fact exists which, with notice, lapse of time or both would
constitute a default thereunder on the part of either of the Companies or, to
the best knowledge of the Companies, any other party thereto, except for any
such default, condition, event or fact that would not be reasonably likely to
have a Material Adverse Effect.
(c) All of the lessee's right, title and interest in and
to that certain lease relating to the office located at the River West Plaza,
770 N. Halsted, Chicago, Illinois and described in Section 2.14 of the
Disclosure Schedule (the "Lease") has been duly and validly assigned to Dental
Care, and such assignment of the Lease has been duly authorized and accepted by
LaSalle National Bank, as lessor.
(d) Except as set forth in Section 2.14 of the Disclosure
Schedule, neither of the Companies (i) has any liability for renegotiation of
government contracts or subcontracts, (ii) has been suspended or debarred from
bidding on contracts or subcontracts with any federal, state or local agency or
governmental authority, (iii) has been investigated by any such agency or
authority with respect to contracts entered into or goods and services provided
by either of the Companies or any of their respective Subsidiaries or (iv) has
had a contract terminated by
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any such agency or authority for default or failure to perform in accordance
with applicable standards.
Section 2.15. Intellectual Property Rights; Employee Restrictions.
(a) Except as set forth in Section 2.15 of the Disclosure
Schedule, each of the Companies (i) has exclusive ownership of or an exclusive
license or other rights to use the trademarks, trademark applications, service
marks, service mark applications, trade names, copyrights, trade secrets,
product designs and systems set forth in Section 2.15(a)(i) of the Disclosure
Schedule and (ii) owns or has a valid license or other rights to use the
computer software listed in Section 2.15(a)(ii) of the Disclosure Schedule (the
"Software") and all other patents, patent applications, trademarks, trademark
applications, service marks, service mark applications, trade names,
copyrights, manufacturing processes and trade secrets (collectively
"Intellectual Property") material in the conduct of their respective businesses
as presently conducted and as proposed to be conducted. To the best knowledge
of the Companies, there are no infringements by any other person of any rights
of either of the Companies under any such Intellectual Property. No claim is
pending or threatened against either of the Companies to the effect that any
such Intellectual Property infringes upon or conflicts with the asserted rights
of any other person and, to the best knowledge of the Companies, there is no
basis for any such claim (whether or not pending or threatened). No claim is
pending or, to the best knowledge of the Companies, threatened against either
of the Companies or any of their respective Subsidiaries to the effect that any
such Intellectual Property is invalid or unenforceable, and, to the best
knowledge of the Companies, there is no basis for any such claim (whether or
not pending or threatened). Except as set forth in Section 2.15 of the
Disclosure Schedule, to the best knowledge of the Companies, neither of the
Companies is making unlawful use of any Intellectual Property of any other
person, including without limitation any former employer or any past or present
employees of either of the Companies. Except as disclosed in Section 2.15 of
the Disclosure Schedule, to the best knowledge of the Companies, neither of the
Companies, nor any of their respective employees, has any agreements or
arrangements with former employers of such employees relating to any
Intellectual Property of such employers, which interfere or conflict with the
performance of such employee's duties to either of the Companies.
(b) It is the policy of the Companies to require their
employees having access to valuable non- public information of either of the
Companies to execute agreements under which such employees are required to
maintain the confidentiality of all such information. Except as disclosed in
Section 2.15 of the Disclosure Schedule, to the best knowledge of the
Companies, neither of the Companies nor any Seller has made any such
information available to any person other than employees of the Companies
except pursuant to written agreements requiring the recipients to maintain the
confidentiality of such information and appropriately restricting the use
thereof. Except as set forth in Section 2.15 of the Disclosure Schedule, no
employee or consultant of either of the Companies owns any rights in any
products, technology or Intellectual Property of either of the Companies.
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(c) To the best knowledge of the Companies, the computer
software used by either of the Companies included in the Intellectual Property
performs in all material respects in accordance with the documentation and
other written material used in connection with the Software.
Section 2.16. Litigation. Except as shown in Section 2.16 of the
Disclosure Schedule, there is (a) no litigation pending or, to the best
knowledge of the Companies, threatened against either of the Companies or
affecting any of their respective properties or assets, or against any of their
respective officers, directors or stockholders, (b) no governmental or
administrative proceeding pending or, to the best knowledge of the Companies,
threatened against either of the Companies, or (c) to the best knowledge of the
Companies, no governmental or administrative investigation pending or
threatened against either of the Companies, which, in any case, if adversely
determined, is reasonably likely to have a Material Adverse Effect, or which
may call into question the validity or hinder the enforceability or performance
of this Agreement; and no claim has been asserted against either of the
Companies for renegotiation or price redetermination of any business
transaction.
Section 2.17. Permits; Compliance with Laws. Except as shown in
Section 2.17 of the Disclosure Schedule, each of the Companies has all
necessary franchises, authorizations, approvals, orders, consents, licenses,
certificates, permits, registrations, qualifications or other rights and
privileges, including without limitation certificates of authority from the
Illinois Department of Insurance ("Certificates of Authority") (collectively
"Permits"), necessary to permit it to own its properties and to conduct its
businesses as the same are presently conducted and all such Permits are in full
force and effect and, to the best knowledge of the Companies, valid, except to
the extent the absence of any such Permit (other than the Certificates of
Authority) is not reasonably likely to have a Material Adverse Effect. Except
as shown in Section 2.17 of the Disclosure Schedule, no Permit is subject to
termination as a result of the execution of the Agreement or consummation of
the transactions contemplated hereby. Except as shown in Section 2.17 of the
Disclosure Schedule, each of the Companies is in compliance with all applicable
statutes, ordinances, orders, rules and regulations (including all applicable
environmental laws and regulations) promulgated by any federal, state,
municipal or other governmental authority which apply to the conduct of its
business, except for any such non-compliance or violation that is not
reasonably likely to have a Material Adverse Effect. Since July 1, 1994 and,
to the best of the Companies' knowledge, since 1992, neither of the Companies
has ever entered into or been subject to any judgment, consent decree,
compliance order or administrative order with respect to any environmental or
health and safety law or received any request for information, notice, demand
letter, administrative inquiry or formal or informal complaint or claim with
respect to any environmental or health and safety matter or the enforcement of
any such law.
Section 2.18. Compliance with Insurance Laws. Without limiting the
representations and warranties contained elsewhere in this Agreement, except as
set forth in Section 2.18 of the Disclosure Schedule:
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(a) Each of the Companies has since July 1, 1994 and, to
the best knowledge of the Companies, prior to that date, made all reports
required under applicable insurance statutes. Section 2.18 of the Disclosure
Schedule sets forth the licenses held by each of the Companies under all
applicable insurance or other similar laws. Other than the licenses listed in
Section 2.18 of the Disclosure Schedule, neither of the Companies is required
to hold any other license, permit or authorization under the insurance laws of
any state other than the State of Illinois to conduct its businesses as
presently conducted, except to the extent the absence of any such license,
permit or authorization is not reasonably likely to have a Material Adverse
Effect. Each of the Companies has all other necessary Permits of and from all
insurance regulatory authorities to conduct its businesses as presently
conducted.
(b) The dental plan products offered and sold by the
Companies have been and are offered and sold in compliance with the
requirements of all relevant laws and regulations, in each case, with such
exceptions as would not be reasonably likely to have a Material Adverse Effect;
and neither of the Companies has received any notification from any insurance
regulatory authority to the effect that any additional Permit from such
insurance regulatory authority is needed to be obtained by it. Neither of the
Companies has since July 1, 1994, or to the best knowledge of the Companies,
ever, entered into or been subject to any judgment, consent decree, compliance
order or administrative order other than any such issued in the ordinary course
of business with respect to any insurance or other similar law or, other than
in the ordinary course of business, received any request for information,
notice, demand letter, administrative inquiry or formal or informal complaint
or claim with respect to any insurance or other similar law or the enforcement
of any such law.
(c) Since July 1, 1994, and to the best knowledge of the
Companies prior to that date, neither of the Companies has failed to comply
with any applicable statute, ordinance, order, rule or regulation, or failed to
obtain any Permit in the State of Illinois, or, to the best knowledge of the
Companies, in any jurisdiction other than the State of Illinois in which either
of the Companies is conducting or has prior to the date hereof conducted any
activities including without limitation activities relating to the offer and
sale of dental care products, plans or services, the recruitment of dentists or
dental offices in connection with the offer and sale of such products, plans or
services, the marketing of any such products plans or services to potential
purchasers thereof or subscribers thereto, lobbying efforts or similar
activities, or any joint venture with any other party relating to the
foregoing, except in each case where the failure to comply or obtain any Permit
(individually or in the aggregate) could not reasonably be expected to have a
Material Adverse Effect.
Section 2.19. Labor Laws. As of December 31, 1995, the Companies
and their respective Subsidiaries collectively employ 86 full-time and 1
part-time employees. Neither of the Companies is delinquent in payments to any
of its employees for any wages, salaries, commissions, bonuses or other direct
compensation for any services performed for it to the date hereof or amounts
required to be reimbursed to such employees. There are no charges of
employment discrimination or unfair labor practices or strikes, slowdowns,
stoppages of work,
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or any other concerted interference with normal operations existing, pending
or, to the best knowledge of the Companies, threatened against or involving
either of the Companies. Neither of the Companies knows of any union
organizing activities for the purpose of causing Dental Care's employees to be
certified as a collective bargaining unit under federal labor law. Except as
set forth in Section 2.19 of the Disclosure Schedule there are no claims or
charges relating to or alleging violations of any federal, state or local
employment laws, including without limitation laws relating to discrimination,
harassment, family leave or wage payments, existing, pending or, to the best
knowledge of the Companies, threatened against either of the Companies. Each
of the Companies is, and at all times since July 1, 1994, has been, in
compliance in all material respects with the requirements of the Immigration
Reform Control Act of 1986. There are no changes (including, without
limitation, resignations) pending or, to the best knowledge of the Companies,
threatened, with respect to the senior management or key supervisory personnel
of either of the Companies nor has either of the Companies received any notice
or information concerning any prospective change with respect to the senior
management or key supervisory personnel of either of the Companies, except as
set forth on Section 2.19 of the Disclosure Schedule.
Section 2.20. OMITTED.
Section 2.21. Investment Banking; Brokerage. There are no claims
for investment banking fees, brokerage commissions, finder's fees or similar
compensation (exclusive of professional fees of lawyers and accountants) in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of either of the Companies, or
either of the Sellers.
Section 2.22. Employee Benefit Programs.
(a) Section 2.22 of the Disclosure Schedule sets forth a
list of every Employee Program (as defined below) that has been maintained (as
such term is further defined below) by either of the Companies at any time
during since July 1, 1994.
(b) Except as set forth in Section 2.22 of the Disclosure
Schedule, each Employee Program which has been maintained by either of the
Companies since July 1, 1994, and, to the best knowledge of the Companies,
prior to such date, which has at any time been intended to qualify under
Section 401(a) or 501(c)(9) of the Code has received a favorable determination
or approval letter from the Internal Revenue Service ("IRS") regarding its
qualification under such section and has, in fact, been qualified under the
applicable section of the Code from the effective date of such Employee Program
(or, if earlier, the date that all of such Employee Program's assets were
distributed). To the best knowledge of the Companies, no event or omission has
occurred which would cause any such Employee Program to lose its qualification
under the applicable Code section.
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(c) Since July 1, 1994, and, to the best knowledge of the
Companies, prior to such date, there has not been any failure of any party to
comply with any laws applicable with respect to the Employee Programs that have
been maintained by either of the Companies which is reasonably likely to have a
Material Adverse Effect. With respect to any Employee Program now or
heretofore maintained by either of the Companies, there has occurred no
"prohibited transaction," as defined in Section 406 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code,
or breach of any duty under ERISA or other applicable law (including, without
limitation, any health care continuation requirements or any other tax law
requirements, or conditions to favorable tax treatment, applicable to such
plan), which could result, directly or indirectly (including without limitation
through any obligation of indemnification or contribution), in any taxes,
penalties or other liability to either of the Companies or any Affiliate (as
defined below) which is reasonably likely to have a Material Adverse Effect.
No litigation, arbitration, or governmental administrative proceeding (or
investigation) or other proceeding (other than those relating to routine claims
for benefits) is pending or, to the best knowledge of the Companies,
threatened, with respect to any such Employee Program which is reasonably
likely to have a Material Adverse Effect.
(d) Since July 1, 1994, and, to the best knowledge of the
Companies, prior to such date, neither of the Companies has maintained any
Employee Program which is or was subject to Title IV of ERISA or which is or
was a Multiemployer Plan. There has been no "accumulated funding deficiency"
(whether or not waived) with respect to any Employee Program which is subject
to Code Section 412 or ERISA Section 302. All payments and/or contributions
required to have been made (under the provisions of any agreements or other
governing documents or applicable law) with respect to all Employee Programs
heretofore maintained by either of the Companies, for all periods since July 1,
1994 and prior to the date hereof, either have been made or have been accrued
(and all such unpaid but accrued amounts are described on Section 2.22 of the
Disclosure Schedule). Since July 1, 1994 and, to the best knowledge of the
Companies, prior to such date, none of the Employee Programs maintained by
either of the Companies has ever provided health care or any other non-pension
benefits to any employees after their employment was terminated (other than as
required by part 6 of subtitle B of title I of ERISA) or has ever promised to
provide such post-termination benefits.
(e) With respect to each Employee Program maintained by
either of the Companies on or after July 1, 1994, complete and correct copies
of the following documents (if applicable to such Employee Program) have
previously been delivered to American Prepaid: (i) all documents embodying or
governing such Employee Program, and any funding medium for the Employee
Program (including, without limitation, trust agreements) as they may have been
amended to the date hereof; (ii) the most recent IRS determination or approval
letter with respect to such Employee Program under Code Section 401 or
501(c)(9), and any applications for determination or approval subsequently
filed with the IRS; (iii) the two most recently filed IRS Forms 5500, with all
applicable schedules; (iv) the summary plan description for such Employee
Program (or other descriptions of such Employee Program provided to employees)
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and all modifications thereto; (v) any insurance policy (including any
fiduciary liability insurance policy) related to such Employee Program; (vi)
any documents evidencing any loan to an Employee Program that is a leveraged
employee stock ownership plan.
(f) Each Employee Program maintained by either of the
Companies as of the date hereof is subject to termination by the Board of
Directors of such Company without any further liability or obligation on the
part of such Company to make further contributions to any trust maintained
under any such Employee Program following such termination other than
contributions with respect to the year of termination or the preceding year.
(g) For purposes of this Section 2.22:
(i) "Employee Program" means (A) all employee
benefit plans within the meaning of ERISA Section 3(3), including, but
not limited to, multiple employer welfare arrangements (within the
meaning of ERISA Section 3(40)), plans to which more than one
unaffiliated employer contributes and employee benefit plans (such as
foreign or excess benefit plans) which are not subject to ERISA; and
(B) all stock option plans, bonus or incentive award plans, severance
pay policies or agreements, deferred compensation agreements,
supplemental income arrangements, vacation plans, and all other
employee benefit plans, agreements, and arrangements not described in
(A) above. In the case of an Employee Program funded through an
organization described in Code Section 501(c)(9), each reference to
such Employee Program shall include a reference to such organization;
(ii) an entity "maintains" an Employee Program if
such entity sponsors, contributes to, or provides (or has promised to
provide) benefits under such Employee Program, or has any obligation
(by agreement or under applicable law) to contribute to or provide
benefits under such Employee Program, or if such Employee Program
provides benefits to or otherwise covers employees of such entity (or
their spouses, dependents, or beneficiaries);
(iii) An entity is an "Affiliate" of either of the
Companies or their respective Subsidiaries for purposes of this
Section 2.22 if it would have ever been considered a single employer
with such Company or such Subsidiary under ERISA Section 4001(b) or
part of the same "controlled group" as such Company for purposes of
ERISA Section 302(d)(8)(C), and in any case includes each Subsidiary;
and
(iv) "Multiemployer Plan" means an employee
pension plan to which more than one employer contributes and which is
maintained pursuant to one or more collective bargaining agreements.
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Section 2.23. Environmental Matters.
(a) Except as set forth in Section 2.23 of the Disclosure
Schedule, (i) since July 1, 1994, neither of the Companies has, to the best of
its knowledge, ever generated, transported, used, stored, treated, disposed of,
or managed any Hazardous Waste (as defined below) in violation of any
Environmental Law; (ii) to the best knowledge of the Companies, no Hazardous
Material (as defined below) has ever been or is threatened to be spilled,
released, or disposed of by either of the Companies at any site presently or
formerly owned, operated, leased, or used by either of the Companies; (iii)
since July 1, 1994, no Hazardous Material has ever been transported from any
site presently or formerly owned, operated, leased, or used by either of the
Companies for treatment, storage, or disposal at any other place; (iv) neither
of the Companies presently owns, operates, leases, or uses, and has not
previously owned, operated, leased, or used since July 1, 1994, any site on
which underground storage tanks are or were located; and (v) no lien has ever
been imposed by any governmental agency on any property, facility, machinery,
or equipment owned, operated, leased, or used by either of the Companies in
connection with the presence of any Hazardous Material.
(b) Except as set forth in Section 2.23 of the Disclosure
Schedule, (i) neither of the Companies has any liability under, nor has either
of the Companies violated in any material respect, any Environmental Law (as
defined below), which liability or violation is reasonably likely to have a
Material Adverse Effect; (ii) the Companies, any property owned, operated,
leased, or used by any of them, and any facilities and operations thereon are
presently in compliance in all material respects with all applicable
Environmental Laws to the best of the Companies' knowledge; (iii) since July 1,
1994, neither of the Companies nor any of their respective Subsidiaries has
entered into or been subject to any judgment, consent decree, compliance order,
or administrative order with respect to any environmental or health and safety
matter or received any request for information, notice, demand letter,
administrative inquiry, or formal or informal complaint or claim with respect
to any environmental or health and safety matter or the enforcement of any
Environmental Law.
(c) Except as set forth in Section 2.23 of the Disclosure
Schedule, to the best knowledge of the Companies, no site owned, operated,
leased, or used by either of the Companies contains any asbestos or
asbestos-containing material in a friable or air-borne state, any
polychlorinated biphenyls (PCBs) or equipment containing PCBs, or any urea
formaldehyde foam insulation in violation of any applicable Environmental Law.
(d) The Companies have provided to American Prepaid
copies of all documents, records, and information available to them concerning
any environmental or health and safety matter relevant to either of the
Companies, whether generated by such Companies or others, including, without
limitation, environmental audits, environmental risk assessments, site
assessments, documentation regarding off-site disposal of Hazardous Materials,
spill control plans, and reports, correspondence, permits, licenses, approvals,
consents, and other
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authorizations related to environmental or health and safety matters issued by
any governmental agency.
(e) For purposes of this Section 2.23, (i) "Hazardous
Material" shall mean and include any hazardous waste, hazardous material,
hazardous substance, petroleum product, oil, toxic substance, pollutant, or
contaminant, as defined or regulated under any Environmental Law, or any other
substance which may pose a threat to the environment or to human health or
safety; (ii) "Hazardous Waste" shall mean and include any hazardous waste as
defined or regulated under any Environmental Law; (iii) "Environmental Law"
shall mean any environmental or health and safety-related law, regulation, rule
or ordinance at the foreign, federal, state, or local level, whether existing
as of the date hereof, previously enforced; and (v) "site", "used" and
"operated" refers only to space leased by or in the possession of one or both
of the Companies and not to other space in the relevant building or the land
containing such buildings.
Section 2.24. Insurance. The physical properties, assets,
business, operations, employees, officers and directors of either of the
Companies are insured to the extent disclosed in Section 2.24 of the Disclosure
Schedule. There is no claim by either of the Companies pending under any such
policies as to which coverage has been questioned, denied or disputed by the
insurer. Said insurance policies and arrangements are in full force and
effect, all premiums with respect thereto are currently paid, and each of the
Companies is in compliance in all material respects with the terms thereof.
Said insurance is sufficient for compliance by each of the Companies with all
requirements of applicable law and all agreements and leases to which any of
them is a party.
Section 2.25. Relationship with Customers and Providers. Except as
set forth in Section 2.25 of the Disclosure Schedule, no customer which
accounted for more than 1% of the revenues of the Companies for the fiscal year
ended December 31, 1995 has canceled or otherwise terminated its relationship
with a Company, or has during said period decreased materially its usage or
purchase of the services or products of a Company. Except as disclosed in
Section 2.25 of the Disclosure Schedule, to the best knowledge of the
Companies, no such customer has indicated in any manner any plan or intention
to terminate, to cancel or otherwise materially and adversely modify its
relationship with either of the Companies or to decrease materially or limit
its usage or purchase of the services or products of either of the Companies.
ARTICLE III. REPRESENTATIONS, WARRANTIES AND COVENANTS OF MR.
PHILIP-SORENSEN
Section 3.01. Making of Representations, Warranties and Covenants.
As a material inducement to CompDent and American Prepaid to enter into this
Agreement and consummate the transactions contemplated hereby, Mr.
Philip-Sorensen hereby makes to CompDent and American Prepaid the
representations, warranties and covenants contained in this Article III.
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Section 3.02. Title to Options. Mr. Philip-Sorensen owns
beneficially and of record the Options, free and clear of all Claims except for
Claims set forth in the Option Agreement dated July 1, 1995 between Mr.
Philip-Sorensen and Mr. Tannebaum.
Section 3.03. Authority of Mr. Philip-Sorensen.
(a) Mr. Philip-Sorensen has full authority, power and
capacity to enter into this Agreement and the agreements listed in Section
3.03(a) of the Disclosure Schedule (the "Philip-Sorensen Transaction
Documents"), and to carry out the transactions contemplated hereby and thereby.
This Agreement and the Philip-Sorensen Transaction Documents constitute, or
when executed and delivered by him or on his behalf will constitute, valid and
binding obligations of Mr. Philip-Sorensen enforceable against him in
accordance with their respective terms.
(b) The execution, delivery and performance by Mr.
Philip-Sorensen of this Agreement and each of the Philip-Sorensen Transaction
Documents do not and will not violate any laws, rules or regulations of the
United States or any state or other jurisdiction applicable to Mr.
Philip-Sorensen, or require him to obtain any approval, consent or waiver of,
or make any filing with, any Person (governmental or otherwise) that has not
been obtained or made, except where failure to obtain such approval, consent or
waiver would not have a Material Adverse Effect.
Section 3.04. Exercise of the Options. Between the date of this
Agreement and the date of the Closing, Mr. Philip-Sorensen shall not exercise
any of the Options.
Section 3.05. Confidentiality. In the course of Mr.
Philip-Sorensen's investment in the Companies and otherwise, Mr.
Philip-Sorensen may have had, and may from time to time have, access to
confidential records, data, customers lists, trade secrets and other
confidential information owned or used by the Companies and their respective
Subsidiaries in the course of their respective businesses (the "Confidential
Information"). Accordingly, Mr. Philip- Sorensen agrees (a) to hold the
Confidential Information in strict confidence, (b) not to disclose any of the
Confidential Information to any Person, and (c) not to use, directly or
indirectly, any of the Confidential Information for any competitive or
commercial purpose; provided, however, that the limitations set forth above
shall not apply to any Confidential Information which (i) is then or at any
time becomes generally known to the public other than by reason of a breach of
this Section 3.05; (ii) is disclosed in accordance with an order of a court of
competent jurisdiction or applicable law; or (iii) in which the Companies cease
to have a legally protectible interest. Upon request by American Prepaid, all
data, memoranda, customer lists, notes, programs and other papers and items,
and reproductions thereof relating to the foregoing matters in Mr.
Philip-Sorensen's possession or control shall be returned to American Prepaid
or the Companies.
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Section 3.06. General Release. At the Closing, Mr. Philip-Sorensen
shall deliver to American Prepaid and the Companies a general release for the
benefit of the Companies substantially in the form attached hereto as Schedule
3.06.
Section 3.07. Confirmation of Representations and Warranties of the
Companies. Mr. Philip-Sorensen has reviewed Article II of this Agreement and,
to the best of his actual (but not constructive) knowledge and (with CompDent's
and American Prepaid's permission) without any investigation or inquiry,
nothing has come to his attention to indicate that any of the representations
and warranties of the Companies contained therein are not materially true and
correct.
Section 3.08. Consents and Approvals. Mr. Philip-Sorensen will use
his commercially reasonable efforts to cause all conditions to his obligations
hereunder to be satisfied and to obtain or cause to be obtained prior to the
Closing Date all necessary consents and approvals to the performance of his
obligations under this Agreement as set forth in Section 3.03 of the Disclosure
Schedule. Mr. Philip-Sorensen will cooperate in all reasonable respects with
CompDent and American Prepaid with respect to matters reasonably within the
control of Mr. Philip-Sorensen with a view toward obtaining timely satisfaction
of the conditions to the Closing set forth herein.
Section 3.09. Acquisition Proposals. Except in connection with the
transactions contemplated hereby, unless and until this Agreement shall have
been terminated in accordance with its terms for any reason, Mr.
Philip-Sorensen shall not, directly or indirectly, (a) take any action to
solicit, initiate submission of or encourage proposals or offers from any
Person relating to any acquisition or purchase of all or a portion of the
Shares or the Options or any assets of, or any equity interest in, either of
the Companies, any merger or business combination with either of the Companies,
any public or private offering of shares of the capital stock of either of the
Companies, or any other acquisition, transaction or financing involving either
of the Companies (an "Acquisition Proposal"), (b) participate in any
substantive discussions or negotiations regarding an Acquisition Proposal with
any Person other than CompDent and American Prepaid, their affiliates and
representatives, the Companies, Mr. Tannebaum and all of their respective
affiliates and representatives, (c) furnish any information with respect to or
afford access to the properties, books or records of either of the Companies to
any Person who may consider making or has made an offer with respect to an
Acquisition Proposal other than CompDent, American Prepaid and their affiliates
and representatives, or (d) otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any Person
other than CompDent, American Prepaid and their affiliates and representatives
to do or seek any of the foregoing. Mr. Philip-Sorensen shall promptly notify
CompDent and American Prepaid upon receipt of any offer or indication that any
Person is considering making an offer with respect to an Acquisition Proposal
or any request for information relative to either of the Companies, and will
not accept any such offer for so long as this Agreement remains in effect.
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Section 3.10. No Transfer of the Options; Voting. Unless and until
this Agreement shall have been terminated in accordance with its terms for any
reason, Mr. Philip-Sorensen shall not directly or indirectly exchange, deliver,
assign, pledge, encumber or otherwise transfer or dispose of any of the
Options, nor shall Mr. Philip-Sorensen directly or indirectly grant any right
of any kind to acquire, dispose of, vote or otherwise control in any manner any
of the Options, except pursuant to this Agreement; provided that a transfer to
the executor or administrator of Mr. Philip- Sorensen upon his death shall not
be deemed prohibited by this Section 3.10.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF COMPDENT AND AMERICAN
PREPAID
Section 4.01. Making of Representations and Warranties. As a
material inducement to the Sellers to enter into this Agreement and consummate
the transactions contemplated hereby, CompDent and American Prepaid, jointly
and severally, hereby makes the representations and warranties contained in
this Article IV to each Seller and each Company.
Section 4.02. Organization and Corporate Power. CompDent and
American Prepaid each is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida with respect to American
Prepaid and Delaware with represent to CompDent, and each is duly qualified or
registered as a foreign corporation in such jurisdictions in which it is
required to be licensed or qualified to conduct its business or own its
properties, except where the failure to so qualify or register would not have a
material adverse effect on CompDent and American Prepaid. CompDent or American
Prepaid each has all corporate power and authority to own or lease its
respective properties and to conduct its respective business in the manner and
in the places where such properties are owned or leased or such business is
conducted and to enter into this Agreement and the documents listed on Schedule
4.02 (the "CompDent Transaction Documents") and to carry out the transactions
contemplated hereby and thereby.
Section 4.03. Authority. The execution, delivery and performance
of this Agreement and each CompDent Transaction Document have been duly
authorized by all necessary corporate action of CompDent and American Prepaid,
respectively, and no other corporate action on the part of American Prepaid,
CompDent or their respective stockholders is required in connection therewith.
This Agreement and each such CompDent Transaction Document constitutes, or when
executed and delivered by CompDent and American Prepaid, respectively, will
constitute, valid and binding obligations of CompDent and American Prepaid,
respectively, enforceable against each of them in accordance with their
respective terms. The execution, delivery and performance by CompDent and
American Prepaid, respectively, of this Agreement and each such CompDent
Transaction Document:
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(a) do not and will not violate any provisions of
their respective charter documents or by-laws;
(b) do not and will not result in any violation by either
American Prepaid or CompDent of any laws, rules or regulations of the United
States or any state or other jurisdiction applicable to them respectively, or
require either of them to obtain any approval, consent or waiver of, or to make
any filing with, any Person (governmental or otherwise) that has not been
obtained or made, except as contemplated by Schedule 4.03; and
(c) do not and will not result in a breach of, constitute
a default under, accelerate any obligation under or give rise to a right of
termination of any indenture or loan or credit agreement or any other
agreement, contract, instrument, mortgage, lien, order, writ, judgment,
injunction, decree, determination or arbitration award to which CompDent or
American Prepaid is a party or by which the property of CompDent or American
Prepaid is bound or affected, or result in the creation or imposition of any
mortgage, pledge, lien, security interest or other charge or encumbrance on any
property or asset owned by CompDent or American Prepaid;
in each case under the foregoing clauses (a), (b) and (c) to the extent the
same would have a material adverse effect on the properties, assets, business,
financial condition or results of operation of CompDent and American Prepaid.
Section 4.04. Investment Banking; Brokerage. There are no claims
for investment banking fees, brokerage commissions, finder's fees or similar
compensation (exclusive of professional fees of lawyers and accountants) in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of CompDent or American Prepaid
or any of their affiliates or representatives except for fees of American
Prepaid's investment banking advisor, The Robinson-Humphrey Company, Inc.
(which fees are the exclusive obligation of CompDent or American Prepaid).
Section 4.05. Litigation. There is no litigation against CompDent
or American Prepaid pending or, to the best knowledge of CompDent and American
Prepaid, threatened, or any governmental or administrative proceeding or, to
the best knowledge of CompDent and American Prepaid, investigation pending or
threatened, which may call into question the validity or hinder the
enforceability or performance of this Agreement.
Section 4.06. Investment Purpose. CompDent and American Prepaid
each acknowledges that the Shares, the IHCS Note and the Options have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or under applicable state securities laws and that the Shares, the IHCS Note
and the Options may not be sold, transferred, offered for sale, or otherwise
disposed of without registration under the Securities Act and any applicable
state securities laws, except pursuant to an exemption from such registration.
American Prepaid is purchasing the Shares, the IHCS Note and the Options for
its
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own account, only for investment purposes and with no present intention to
effect a public distribution of the Shares, the IHCS Note or the Options and
agrees not to subsequently offer or sell any of the Shares, the IHCS Note or
the Options except in compliance with federal and applicable state securities
laws.
Section 4.07. Solvency. American Prepaid has adequate cash to pay
the purchase price (as adjusted pursuant to Article I) at the Closing without
the necessity of a public or private offering of its securities or securities
of CompDent. By entering into this Agreement and consummating the transactions
hereunder, neither American Prepaid nor CompDent has any intent to delay,
hinder or defraud any of their creditors or creditors of any of their
respective Subsidiaries. CompDent and American Prepaid each represents and
warrants that they and each of their respective Subsidiaries are each solvent,
in that the fair value of their respective assets exceeds their respective
liabilities and each reasonably believes that it has adequate capital to
operate its business as a going concern on a consolidated basis, and each has
paid its debts as they became due (except those contested in good faith). In
support of the foregoing, CompDent has delivered to the Sellers its financial
statements as of December 31, 1995 and for the year then ended, and further
represents and warrants that such financial statements fairly present the
consolidated financial condition and consolidated results of operations of
CompDent and its consolidated subsidiaries as of the dates and for the periods
indicated and were prepared in accordance with generally accepted accounting
principles applied on a consistent basis. There has been no material adverse
change in CompDent's consolidated financial condition since the date of such
financial statements through February 28, 1996 (CompDent and American Prepaid
having no obligation to update the foregoing representation for purposes of
Section 7.02 hereof or otherwise with respect to any period subsequent to such
date).
ARTICLE V. COVENANTS OF THE COMPANIES AND MR. TANNEBAUM
Section 5.01. Making of Covenants and Agreements. Each of the
Companies and Mr. Tannebaum hereby makes the covenants and agreements of each
of them, respectively, set forth in this Article V, and Mr. Tannebaum agrees to
cause each of the Companies to comply with such agreements and covenants made
by it. Mr. Tannebaum shall have no right of indemnity or contribution after
the Closing from any of the Companies with respect to the breach of any
covenant or agreement hereunder. Each of the Companies makes the following
covenants as to it itself only and not as to the other Company.
Section 5.02. Consents and Approvals.
(a) The Companies and Mr. Tannebaum shall, as soon as
reasonably practicable after the date hereof and in any event not later than 15
business days after the date hereof, make any and all filings which are
required by either of them under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 ("HSR Act"), and will cooperate with CompDent and American Prepaid
in providing such information to it as may be necessary to
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enable it to make their filing under the HSR Act; provided, however, that
neither the Companies nor Mr. Tannebaum shall be obligated to disclose to
CompDent or American Prepaid financial or investment information concerning Mr.
Tannebaum, whether or not such information is included in the Companies'
filings under the HSR Act.
(b) The Companies and Mr. Tannebaum will use commercially
reasonable efforts to cause all conditions to the obligations of CompDent and
American Prepaid set forth in Section 7.01 hereof to be satisfied and to obtain
or cause to be obtained prior to the Closing Date the consents and approvals
described in Section 2.03 of the Disclosure Schedule; provided, however, that
"commercially reasonable efforts" does not require the payment of money (other
than statutory filing fees to government agencies) to, or the acceptance of the
modification of existing obligations of, or the creation of new obligations to,
any Person to obtain such consent, waiver, approval, resignation or other
action, and provided further, however, that the foregoing shall not limit any
such party's other covenants set forth in this Article V. The Companies and
Mr. Tannebaum will cooperate in all respects with CompDent and American Prepaid
with a view toward obtaining timely satisfaction of the conditions to the
Closing contained in Section 7.01, it being understood that all fees and
expenses associated with obtaining required governmental consents and approvals
shall be paid in accordance with Section 10.05 hereof. The Companies and Mr.
Tannebaum shall make all filings, document submissions, applications,
statements and reports to all federal, state or local government agencies or
entities which are required to be made by them prior to the Closing pursuant to
any applicable statute, rule or regulation in connection with this Agreement
and the transactions contemplated hereby, it being understood that the required
filing fees in connection therewith shall be paid in accordance with Section
10.05 hereof. The Companies and Mr. Tannebaum shall (i) furnish to CompDent
and American Prepaid copies of all filings and such necessary information of
the Companies as may be requested by CompDent and American Prepaid in
connection with their preparation of required filings or submissions to any
governmental agency; and (ii) keep CompDent and American Prepaid informed of
the status of any inquiries made of any of them by any federal, state or local
agency or authority with respect to this Agreement or the transactions
contemplated hereby, provided, however, that none of the Companies or Mr.
Tannebaum shall be obligated to furnish to CompDent and American Prepaid any
financial or investment information with respect to Mr. Tannebaum, whether or
not such information is contained in a Hart-Scott-Rodino filing, or elsewhere.
Section 5.03. Conduct of Business. Between the date of this
Agreement and the Closing Date, Mr. Tannebaum shall cause the each of the
Companies to do, and each of the Companies shall do, the following, unless
CompDent and American Prepaid shall otherwise consent in writing:
(a) conduct its business only in the ordinary course
consistent with past practices, refrain from changing or introducing any method
of management or operations except in the ordinary course of business or amend
any management agreement except as described in Section 5.03(a) of the
Disclosure Schedule;
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(b) refrain from making any purchase, sale or disposition
of any asset or property other than in the ordinary course of business, from
purchasing or selling any capital asset costing more than $25,000 (except as
identified in the Disclosure Schedule) and from mortgaging, pledging,
subjecting to a lien or otherwise encumbering any of its properties or assets
except in the ordinary course of business for bank loans or equipment
financing;
(c) refrain from incurring any guaranty of the
obligations of others except the other Company, and from incurring or modifying
any other contingent or fixed obligations or liabilities other than in the
ordinary course of business consistent with past practice except in connection
with any new bank loans or equipment financing, in connection with the
settlement or other disposition of any presently-existing litigation or legal
compliance risk or any dispute or claim or litigation arising after the date
hereof other than by the voluntary act of a Company, provided that the
Companies first consult with CompDent and American Prepaid prior to taking any
such action;
(d) refrain from making any change in its incorporation
documents, by-laws or authorized or issued capital stock or from acquiring any
securities issued by any other business organization other than short-term
investments in the ordinary course of business;
(e) refrain from (i) declaring, setting aside or paying
any dividend, making any other distribution in respect of its capital stock
except as contemplated by Section 5.03(e) of the Disclosure Schedule, (ii)
making any direct or indirect redemption, purchase or other acquisition of its
capital stock or options with respect thereto, (iii) issuing, granting,
awarding, selling, pledging, disposing of or encumbering or authorizing the
issuance, grant, award, sale, pledge, disposition or encumbrance of any shares
of, or securities convertible or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of its capital stock
of any class thereof or (iv) entering into any agreement or commitment to do to
any of the foregoing;
(f) refrain from making any change in the compensation
payable or to become payable to any of its officers, employees or sales agents,
except for increases in salary or wages ranging from 3% to 8% in the ordinary
course of business that are consistent with past practices, increases for sales
agents in the ordinary course of business that are consistent with past
practices and certain discretionary bonus arrangements of Richard Sawicz
described in Section 2.09 of the Disclosure Schedule, or granting any severance
or termination pay to, or entering into or amending any employment, severance
or other agreement or arrangement with, any of its directors, officers or other
employees, or establishing, adopting or entering into or amending any
collective bargaining, bonus, incentive, deferred compensation, profit sharing,
stock option or purchase, insurance, pension, retirement or other employee
benefit plan, provided, however, that the Companies may make any such payment
to the extent each such payment is reflected in the Closing Date Pro Forma
Balance Sheet (as defined in Section 7.01(m));
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(g) except as contemplated by Section 5.09 hereof,
refrain from prepaying any loans, including without limitation loans from its
stockholders, officers or directors (if any), making any change in its
borrowing arrangements or modifying, amending or terminating any of its
contracts except in the ordinary course of business, or waiving, releasing or
assigning any material rights or claims except in the ordinary course of
business; provided, however, that this paragraph shall not restrict either of
the Companies from paying or prepaying any existing bank loans which it may
replace with loans from a different bank or banks or which it may deem to be no
longer necessary as long as the Companies consult with American Prepaid and
CompDent prior to any such replacement;
(h) use its commercially reasonable efforts to prevent
any Material Adverse Change with respect to its management and supervisory
personnel or banking arrangements;
(i) use commercially reasonable efforts to keep intact
its business organization and to preserve the goodwill of and business
relationships with all suppliers, customers and others having business
relations with it;
(j) pay all accounts payable in the ordinary course of
business in a manner consistent with past practice and in any event within 60
days unless they are being disputed in good faith;
(k) use commercially reasonable efforts to have in effect
and maintain at all times all insurance of the kind, in the amount and with the
insurers set forth in Section 2.24 of the Disclosure Schedule or equivalent
insurance with any substitute insurers of comparable credit worthiness;
(l) refrain from changing accounting policies or
procedures (including, without limitation, procedures with respect to the
payment of accounts payable and collection of accounts receivable) or from
making any tax election or settling or compromising any federal, state, local
or foreign income tax liability except in the ordinary course of business;
provided, however, that nothing herein contained shall restrict IHCS or Mr.
Tannebaum from electing to terminate IHCS's status as a "Subchapter S"
corporation;
(m) refrain from entering into any executory agreement,
commitment or undertaking to do any of the activities prohibited by the
foregoing provisions;
(n) permit CompDent, American Prepaid and their
authorized representatives (including without limitation their attorneys,
accountants, investment bankers, pension and environmental consultants and
software or information systems consultants) to have reasonable access with
reasonable notice and during normal business hours to all of its properties,
assets, books, records, business files, executive personnel, tax returns,
contracts and documents and furnish to CompDent, American Prepaid and their
authorized representatives such financial and other information available to
the Companies without special studies or compilations with
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respect to its business or properties as CompDent and American Prepaid may from
time to time reasonably request; provided, however, that if the Companies are
prohibited under the terms of a confidentiality agreement from furnishing
materials to CompDent and American Prepaid and, after using all commercially
reasonable efforts, they are unable to obtain a waiver of such confidentiality,
the Companies shall deliver to CompDent and American Prepaid a list of such
materials together with, unless prohibited by the confidentiality agreement, a
brief description of their contents and of the parties thereto. Prior to the
Closing, the Companies shall allow a software or information systems consultant
selected by CompDent and American Prepaid and subject to an appropriate
confidentiality agreement, performance by which is guaranteed by CompDent
through the Closing (which shall permit discussions with CompDent and American
Prepaid but not disclosure of the specific processes and systems relating to
the design and operation of the Software) to have access to and become familiar
with the Software and all relevant procedures, processes and systems relating
to the design and operation of the Software and related systems to the extent
within the Companies' possession and control, to have access to and conduct
interviews with personnel of the Companies that are familiar with the design
and operation of the Software and such Company's information systems regarding
operating procedures and functions (including, without limitation, the
preparation and processing of month-end runs and reports);
(o) in connection with any filings to be made by CompDent
under the Securities Act or the Securities Exchange Act of 1934, as amended,
(i) provide for inclusion therein or filing therewith financial and other
information and documents requested by CompDent provided that CompDent shall
provide to the Companies those portions of the relevant filings and documents
that include any such information and documents relating to the Companies at
least two business days prior to any such filing, (ii) use its commercially
reasonable efforts to cause KPMG Peat Marwick, LLP, its independent public
accountants, to deliver such consents, reports and comfort letters in
connection therewith as CompDent may reasonably request, provided that all such
consents, reports and comfort letters shall be at the expense of CompDent, and
(iii) generally cooperate with CompDent and its representatives and agents in
connection therewith, provided that all expenses relating to such consents,
reports and comfort letters shall be paid directly and promptly by CompDent and
shall not be accrued by either of the Companies (except for expenses that the
Companies would have incurred in any event, such as the expenses of the annual
audit which would have been performed without reference to the requirements of
such inclusion or filing); provided, however, that information from unaudited
financial statements with respect to periods or dates prior to 1994 may not be
included in any such filing or prospectus; and
(p) provide monthly aging reports of accounts receivables
and monthly financial statements, including a balance sheet as of month-end and
a monthly income statement, as soon as practicable but not later than 30 days
after the last day of each month (provided that the January report shall not be
delivered until March).
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Notwithstanding anything to the contrary contained above or in this Section
5.03, the Companies are not prohibited by any provision of this Agreement from
entering into a sublease, accepting an assignment of the existing lease, or
entering into a cost sharing agreement, with respect to the space presently
used by them, or entering into one or more consulting agreements consistent
with past practices, provided that the Companies first consult with CompDent
and American Prepaid prior to taking any such actions.
Section 5.04. Certain Contracts. Mr. Tannebaum is a party to two
certain agreements pursuant to which he acquired the stock of the Companies.
Upon notification by CompDent of any circumstances constituting, or which
CompDent reasonably believes may constitute, a breach by any seller thereunder,
which circumstances may not give rise to rights of indemnification on the part
of CompDent and its affiliates under Article IX of this Agreement, Mr.
Tannebaum may elect to proceed against the relevant seller or sellers under the
relevant agreement or agreements on behalf of and for the benefit of CompDent
as owner of the Companies to seek damages and upon recovery of the same, such
damages shall be remitted promptly to CompDent. In the event Mr. Tannebaum
does not initiate such a claim within 30 days after receipt of such notice, he
shall promptly make an assignment of rights as shall be sufficient to enable
CompDent to pursue the claim against the relevant seller or sellers directly.
Section 5.05. Acquisition Proposals. Except in connection with the
transactions contemplated hereby, unless and until this Agreement shall have
been terminated for any reason, Mr. Tannebaum and the Companies shall not and
they shall communicate in writing to all directors and officers of the
Companies that they are not authorized to and must not (and if Mr. Tannebaum or
either Company becomes aware that any such person is engaging in any such
prohibited action, Mr. Tannebaum or such Company shall follow up promptly with
a direct and written communication to such Person ordering him or her to
discontinue such action immediately), (a) take any action to solicit, initiate
submission of or encourage any Acquisition Proposal, (b) participate in any
substantive discussions or negotiations regarding an Acquisition Proposal with
any Person other than CompDent, American Prepaid and their affiliates and
representatives or (c) furnish any information with respect to or afford access
to the properties, books or records of either of the Companies to any Person
who is known to be considering making or has made an offer with respect to an
Acquisition Proposal other than CompDent, American Prepaid and their affiliates
and representatives or (d) otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any Person
other than CompDent, American Prepaid, CompDent and their affiliates and
representatives to do or seek any of the foregoing. Mr. Tannebaum and the
Companies shall promptly notify American Prepaid upon receipt of any offer or
notice that any Person is considering making an offer with respect to an
Acquisition Proposal and shall not accept any such offer for so long as this
Agreement remains in effect.
Section 5.06. Transfers of Shares; Voting. Unless and until this
Agreement shall have been terminated for any reason, Mr. Tannebaum shall not
directly or indirectly exchange, deliver, assign, pledge, encumber or otherwise
transfer or dispose of any of the Shares
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(including options in respect thereof), nor shall Mr. Tannebaum directly or
indirectly grant any right of any kind to acquire, dispose of, vote or
otherwise control in any manner any of the Shares; provided that a transfer to
the executor or administrator of Mr. Tannebaum upon his death shall not be
deemed prohibited by this Section 5.06 and provided, however, that Mr.
Tannebaum agrees to contribute his shares of IHCS to Dental Care as
contemplated by Section 7.01(q).
Section 5.07. Confidentiality. It is acknowledged that Mr.
Tannebaum has had, and may from time to time have, access to confidential
records, data, customers lists, trade secrets and other confidential
information owned or used by either of the Companies in the course of their
respective businesses (the "Confidential Information"). Accordingly, Mr.
Tannebaum agrees (a) to hold the Confidential Information in strict confidence,
(b) not to disclose Confidential Information to any Person (other than in the
regular course of business of either Company or otherwise as required by this
Agreement), and (c) not to use, directly or indirectly, any of the Confidential
Information for any competitive or commercial purpose except on behalf of the
Companies; provided, however, that the limitations set forth above shall not
apply to any Confidential Information which (i) becomes available to the public
other than by reason of a breach of this Section 5.07; or (ii) is disclosed in
accordance with an order of a court of competent jurisdiction or applicable law
or in response to a request from a government agency or (iii) is required to be
filed by a Company with any governmental agency, including the Department of
Insurance of the State of Illinois, or (iv) is deemed appropriate by a Company
for inclusion in proposals to government agencies, or (v) is relevant to any
dispute between CompDent, American Prepaid, and either Seller or either
Company. Upon request by CompDent or American Prepaid made after the Closing,
all data, memoranda, customer lists, notes, programs and other papers and items
of the Companies which constitute Confidential Information, and reproductions
thereof, in Mr. Tannebaum's possession or control shall be returned to
CompDent, American Prepaid or either Company; provided, however, that Mr.
Tannebaum shall not be obligated to deliver to the Companies, CompDent or
American Prepaid information which is relevant to Mr. Tannebaum's acquisition
of the Companies, their tax returns and related information, prior financial
statements, or any information which is relevant to his or their compliance
with any laws or legal obligations or any of the provisions of this Agreement
or to any pending or potential dispute with CompDent or American Prepaid.
Section 5.08. Certain Deliveries. Mr. Tannebaum agrees to execute
and deliver to the Companies at the Closing:
(a) a general release substantially in the form of
Schedule 5.08 attached hereto; and
(b) a Non-Competition Agreement contemplated by Section
1.06 hereof, substantially in the form attached hereto as Schedule 1.06.
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Section 5.09. Credit Line Paydown. The Companies shall make
payments on their respective credit lines with Cole Taylor Bank to reduce the
aggregate amount outstanding under such credit lines by $50,000 per month for
each month from the date of this Agreement to the Closing Date.
Section 5.10. Consulting Agreement Terminations. Dental Care shall
cause the consulting agreements shown in Section 5.10 of the Disclosure
Schedule as "to be terminated" to be terminated and to be of no further force
and effect on or prior to the Closing Date with no further obligation on the
part of either Company to make payments thereunder, such that, among other
things, neither the Companies nor Mr. Tannebaum shall have any obligation to
the other thereafter with respect to consulting services.
ARTICLE VI. COVENANTS OF COMPDENT AND AMERICAN PREPAID.
Section 6.01. Consents and Approvals.
(a) Not later than 15 business days after the date
hereof, CompDent shall (or shall cause American Prepaid to) file its
application for transfer of control of IHCS on Form A with the Department of
Insurance of the State of Illinois, together with all documents and information
of or concerning itself or any of its affiliates as may be required to be filed
in connection therewith under such form or applicable statutes and regulations,
shall thereafter promptly provide such additional information such Department
shall request from time to time, and otherwise shall prosecute such application
diligently and use commercially reasonable efforts to obtain such approval as
promptly as practicable.
(b) As soon as reasonably practicable after the date
hereof and in any event not later than 15 business days after the date hereof,
CompDent and American Prepaid shall make any and all filings which are required
under the HSR Act, and will cooperate with Sellers and the Companies in
providing such information to them as may be necessary to enable Sellers or the
Companies to make their filing under such Act.
(c) CompDent and American Prepaid will use commercially
reasonable efforts to cause all conditions to the obligations of the Sellers
set forth in Section 7.02 hereof to be satisfied and to obtain or cause to be
obtained prior to the Closing Date the consents and approvals described in
Schedule 4.03 attached hereto; provided, however, that "commercially reasonable
efforts" does not require the payment of money (other than statutory filing
fees to government agencies) to, or the acceptance of the modification of
existing obligations of, or the creation of new obligations to, any Person to
obtain such consent, waiver, approval, resignation or other action, and
provided further, however, that the foregoing shall not limit any of such
parties' other covenants set forth in this Article VI. CompDent and American
Prepaid will cooperate in all respects with the Sellers with a view toward
obtaining timely satisfaction of conditions to the Closing contained in Section
7.02, it being understood that all fees and
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expenses associated with obtaining required governmental consents and approvals
shall be paid in accordance with Section 10.05 hereof. CompDent and American
Prepaid shall, unless prohibited by law, (i) furnish to the Representative
copies of all filings and such necessary information of CompDent and American
Prepaid as may be requested by the Representative and the Companies in
connection with their preparation of such required filings or submissions to
any governmental agency, and (ii) will keep the Representative and the
Companies informed of the status of any inquiries made of CompDent and American
Prepaid by any federal, state or local governmental agency or authority with
respect to this Agreement or the transactions contemplated hereby. CompDent
and American Prepaid shall furnish to the Representative a list of any
materials that they are prohibited by law from providing to the Representative,
together with a reference to the source of the prohibition and, if permitted, a
brief summary of the content of such materials and the parties thereto.
Section 6.02. Confidentiality.
(a) From the date of this Agreement until the Closing, or
forever if the Closing does not take place for any reason, all business and
related information, whether or not confidential, furnished to CompDent,
American Prepaid and their affiliates and representatives by either Seller or
either Company shall be kept confidential by CompDent, American Prepaid and
their affiliates and representatives and shall be returned, with all
reproductions thereof and all documents or other media containing any such
information, to such of the Companies or the Sellers who provided it, upon such
termination; provided, however, that the foregoing shall be inapplicable (a)
with respect to information which (i) is or becomes available to the public
without breach of this confidentiality obligation, or (ii) is or becomes
available to CompDent or American Prepaid from a third party, provided that the
third party did not receive the same, directly or indirectly, from a Seller or,
either Company and was not under an obligation of confidentiality to the source
of such information at the time it was disclosed to CompDent or American
Prepaid, (b) in connection with filings contemplated by this Agreement to the
extent of such information as CompDent and American Prepaid is explicitly
permitted by this Agreement to disclose in such filings and (c) to the extent
disclosure is required by any applicable law or regulation, by any authorized
administrative or governmental agency or, in the opinion of counsel to American
Prepaid, in connection with any public offering, pursuant to applicable
requirements of the securities laws or any stock exchange or self-regulatory
organization to the extent permitted by paragraph (o) of Section 5.03;
provided, however, that CompDent and American Prepaid will provide notice to
the Sellers and the Companies before disclosing any information pursuant to
this Section 6.02 and will cooperate with the Sellers and the Companies on
endeavoring to preserve, to the extent reasonably practicable and not
inconsistent with its legal obligations (including the obligation to make
timely, full and accurate disclosure in a prospectus or securities filings or
reports), the confidential nature thereof. Each of the Sellers and the
Companies acknowledges and agrees that a copy of this Agreement, together with
exhibits and schedules hereto, may be filed by CompDent as an exhibit to a
Registration Statement under the Securities Act in connection with a public
offering and that other information regarding the Companies including their
financial statements may be set forth
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in the prospectus included as part of such Registration Statement as
contemplated by Section 5.03(o) hereof; and the parties hereto acknowledge that
such use of information shall not be deemed a breach of this Agreement.
(b) CompDent will disclose and will cause American
Prepaid and its other affiliates to disclose to the Department of Insurance of
the State of Illinois, to any other governmental agency whose consent or
approval to the transactions contemplated by this Agreement is required or
contemplated, and to the Companies for the purpose of making new proposals to
government agencies as potential customers or further informing pending
proposals made by the Companies, such information as the Department or any such
agency may require in connection with CompDent's and American Prepaid's
solicitation of such consent or approval or that CompDent may reasonably deem
necessary in connection with making such proposals or further informing pending
proposals.
Section 6.03. Non-Hire of the Companies' Employees. In the event
that this Agreement is terminated for any reason, for a period of two years
from the date of such termination CompDent and American Prepaid shall not, and
shall cause their Subsidiaries not to, appoint, hire or solicit for hire any
person who is then an officer, director or other employee of either of the
Companies or encourage any such officer, director or other employee to
terminate his or her relationship with either of the Companies.
Section 6.04. Companies' By-Laws. For a period of six years
following the Closing, CompDent and American Prepaid shall not permit the
amendment of the charter or by-laws of any of the Companies so as to adversely
affect the right of directors and officers thereof to indemnification
thereunder, without limitation of Article IX hereof including the terms,
conditions and limitations set forth therein.
Section 6.05. Consulting Buy-Outs. CompDent and American Prepaid
shall contribute sufficient capital to Dental Care to pay, and shall cause
Dental Care to pay, immediately after but concurrently with the Closing all
amounts payable under the agreements listed in Schedule 6.05 hereto (the
"Buy-Out Obligations"), and shall contribute sufficient capital to Dental Care
to pay, and shall cause Dental Care to pay promptly when due, the severance
obligations under that certain Dennis J. Conley Severance Pay Plan made by
Dental Care, dated May 1, 1995 (the "Severance Obligation").
ARTICLE VII. CONDITIONS.
Section 7.01. Conditions to the Obligations of CompDent and
American Prepaid. The obligation of CompDent and American Prepaid to
consummate the transactions contemplated by this Agreement are subject to the
fulfillment, at or prior to the Closing, or waiver by CompDent and American
Prepaid, of the following conditions precedent:
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(a) Representations; Warranties; Covenants. Each of the
representations and warranties of the Sellers and the Companies made pursuant
to this Agreement shall be true and correct in all material respects on and as
of the Closing Date as if made on and as of the Closing Date; the Sellers and
the Companies shall, on or before the Closing Date, have performed and
satisfied all of their respective covenants and agreements set forth herein
which by the terms hereof are to be performed and satisfied on or before the
Closing Date; and Mr. Tannebaum (as to his personal representations only) and
the Companies (and as to Article III, Mr. Philip-Sorensen), respectively, shall
have delivered to CompDent and American Prepaid certificates executed as of the
Closing Date certifying to the foregoing effect with respect to the covenants
and warranties made by each of them, respectively, and also as to the matters
set forth in paragraphs (m), (n) and (o) of this Section 7.01.
(b) Opinion of Counsel and Other Documents. On the
Closing Date, CompDent and American Prepaid shall have received (i) an opinion
of counsel for Mr. Tannebaum dated as of the Closing Date and addressed to
CompDent and American Prepaid, substantially in the form attached as Schedule
7.01(b) hereto, and (ii) such other certificates and documents with respect to
the Sellers and the Companies as counsel for CompDent and American Prepaid
shall have reasonably requested.
(c) No Actions or Proceedings. No action or proceeding
by or before any court, administrative body or governmental agency shall have
been instituted or threatened which seeks to enjoin, restrain or prohibit, or
might result in damages in respect of, this Agreement or the complete
consummation of the transactions contemplated by this Agreement, and which
would in the reasonable judgment of CompDent and American Prepaid make it
inadvisable to consummate such transactions. No law or regulation shall be in
effect and no court order shall have been entered in any action or proceeding
instituted by any party which enjoins, restrains or prohibits this Agreement or
the complete consummation of the transactions contemplated by this Agreement.
(d) American Prepaid Approvals and Consents. CompDent
and American Prepaid shall have received (i) approval of their application for
transfer of control of IHCS and the IHCS Note (and, if required, of Dental
Care) on Form A filed with the Department of Insurance of the State of Illinois
in form and substance reasonably satisfactory to CompDent and American Prepaid
("IDI Approval"), and (ii) any other required authorizations, waivers, consents
and permits to permit the consummation of the transactions contemplated by this
Agreement from all third parties, in each case in form and substance reasonably
satisfactory to CompDent and American Prepaid, and the Sellers and the
Companies shall have complied with Sections 3.08 and 5.02.
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(e) Deliveries. The Sellers and the Companies shall have
delivered or entered into the documents and instruments contemplated by Article
I and this Article VII in form and substance satisfactory to CompDent, American
Prepaid and its counsel if the form thereof is not already specified herein.
(f) Company Approvals and Consents. Each of the Sellers
and each of the Companies shall have made all filings with and notifications of
governmental authorities, regulatory agencies and other entities required to be
made by such Person in connection with the execution and delivery of this
Agreement and the performance of the transactions contemplated hereby, and each
of the Sellers and the Companies shall have received all required
authorizations, waivers, consents and permits to permit the consummation of the
transactions contemplated by this Agreement, in form and substance reasonably
satisfactory to CompDent and American Prepaid, with any conditions or
limitations contained therein or imposed thereby to be approved by CompDent and
American Prepaid, from all third parties, including, without limitation,
applicable governmental authorities, regulatory agencies, lessors, lenders and
contract parties, required in connection with transactions contemplated by this
Agreement or by either of the Companies' permits, leases, licenses and
franchises, to avoid a breach, default, termination, acceleration or
modification of any agreement, contract, instrument, mortgage, lien, lease,
permit, authorization, order, writ, judgment, injunction, decree, determination
or arbitration award as a result of the execution or performance of this
Agreement which would have a Material Adverse Effect. Further, the preferred
provider administrator registration of Dental Care shall have been renewed by
the Illinois Department of Insurance effective as of January 1, 1996.
(g) Material Adverse Changes. There shall not have been
since the date of this Agreement, (i) any actual or threatened termination,
revocation, or other loss or modification after the date hereof of any
certificate of authority or other approval necessary to conduct business or
sell any product in any state held by either of the Companies which
termination, revocation, loss or modification is reasonably likely to have a
Material Adverse Effect, (ii) any event that has had or could reasonably be
anticipated to have a material adverse effect on the properties, assets,
business, financial condition or results of operations of the Companies or
(iii) any adverse Development (as hereinafter defined) affecting or potentially
affecting either Company or any corporation with which Dental Care has a
managing and marketing agreement, including without limitation, any such
Development with respect to any aspect of capitation for dental health
maintenance organizations, maximum co-payments or required content or design of
schedules of benefits or otherwise impacting the design, offering, pricing or
profitability of the products and services offered by the Companies. For
purposes of this Agreement, a Development shall mean any adoption, promulgation
or proposal by the Congress, the Illinois legislature or the Department of
Insurance of the State of Illinois of any statute, regulation, rule or
official policy statement, any calling of public hearings or workshops of any
of the authoritative bodies set forth below, legislative committee
consideration, any circulation for comment of any proposed statute, regulation,
rule or official policy statement that could result in any such adoption,
promulgation or proposal, and any
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pronouncement by the President of the United States, the Governor of Illinois,
the Director of the Department of Insurance of the State of Illinois, the
National Association of Insurance Commissioners or any other departments of the
State of Illinois that govern or regulate dentists, sales agents or the
Companies.
(h) Resignation of Directors. Each of the Companies
shall have received resignations from or shall have removed each of the members
of its Board of Directors, if any, requested in advance of the Closing by
CompDent.
(i) Proceedings Satisfactory to CompDent and American
Prepaid. All proceedings to be taken by the Sellers and/or the Companies in
connection with the consummation of the Closing and the other transactions
contemplated hereby and all certificates, opinions, instruments and other
documents required to effect the transaction contemplated hereby reasonably
requested by CompDent or American Prepaid will be reasonably satisfactory in
form and substance American Prepaid, CompDent and their counsel.
(j) HSR Act. The waiting period under the HSR Act shall
have expired or been terminated.
(k) Consulting Termination. The consulting agreements
shown on Section 5.10 of the Disclosure Schedule as "to be terminated" shall
have been terminated and shall be of no force and effect on or prior to the
Closing Date.
(l) Dual Choice Plans. CompDent and American Prepaid
shall be satisfied, in their reasonable discretion, that no material adverse
change in the financial condition, properties, business or licenses of any
corporation with which Dental Care has a managing and marketing agreement, or
in its relationship with Dental Care, shall have occurred which then has
adversely affected, or reasonably might be expected to adversely affect, its
performance under contracts with dental services customers who also have
contracts for dental services with IHCS or Dental Care or under pending
proposals to customers therefor, or its performance under its management
agreement with Dental Care.
(m) Net Worth and Liquidity. The Closing Net Worth (as
defined below) shall be not less than 80% of the combined total shareholder's
equity of the Companies as shown as the Base Balance Sheet, and the Closing
Cash Amount (as defined below) shall be not less than 80% of the combined cash
and cash equivalents of the Companies as shown on the Base Balance Sheet.
At least five (5) days prior to the Closing Date, the Companies shall
cause to be prepared and delivered to CompDent and American Prepaid a
preliminary consolidated pro forma balance sheet of the Companies as of the
Closing Date which the Companies shall update through the day immediately
preceding the Closing Date (the "Closing Date Pro Forma Balance Sheet")
prepared in a manner consistent with the accounting policies and procedures
used in
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connection with the preparation of the Base Balance Sheet, including, without
limitation, the use of generally accepted accounting principles and, in any
event, an accrual for the obligation of IHCS, if any, to make a post-Closing
distribution to Mr. Tannebaum in respect of federal income taxes payable by the
stockholder of IHCS for the period beginning January 1, 1996 during which IHCS
is an "S" corporation as contemplated by Section 5.03 of the Disclosure
Schedule. CompDent and American Prepaid shall have the right to have their
Chief Financial Officer and Coopers & Lybrand, LLP review the Closing Date Pro
Forma Balance Sheet, the related work papers, the check register and such other
materials of the Companies used in preparing the Closing Date Pro Forma Balance
Sheet. In the event the Closing Date Pro Forma Balance Sheet delivered in
accordance with this paragraph reflects a Closing Net Worth and/or Closing Cash
Amount which fails to meet the conditions set forth in clause (m) above, Mr.
Tannebaum shall be permitted but not required to contribute additional capital
to the Companies on or prior to the Closing Date to satisfy such conditions.
For purposes of this Section 7.01(m), (i) the term "Closing Net Worth" means
the sum of (A) the aggregate shareholder's equity of the Companies as of the
Closing Date as reflected on the Closing Date Pro Forma Balance Sheet, plus (B)
the aggregate amount of the IHCS Tax Distribution, plus (C) the Buy-Out
Obligations to the extent such amounts are accrued for in the Closing Date Pro
Forma Balance Sheet, (ii) the term "Closing Cash Amount" means (A) the
aggregate cash and cash equivalents of the Companies as of the Closing Date as
reflected on the Closing Date Pro Forma Balance Sheet plus (B) the aggregate
amount of the IHCS Tax Distribution and (iii) the term "IHCS Tax Distribution"
shall mean the $240,000 distribution to be made by IHCS to Mr. Tannebaum in
respect of his individual income tax liability as a stockholder of IHCS for the
year ended December 31, 1995.
(n) Capital and Surplus. The financial condition and
liquidity of the Companies as of the Closing Date shall satisfy all minimum
capital or surplus and similar requirements under applicable laws, rules and
regulations of the State of Illinois.
(o) Section 280G. The holder of the outstanding capital
stock of each of the Companies shall have approved and authorized the payments
specified under those certain consulting contracts referenced in paragraphs 4
and 6 of Schedule 6.05 of the Disclosure Schedule in accordance with and in the
manner contemplated by Section 280G of the Code.
(p) Real Estate Lease. LaSalle National Bank, as lessor
under the Lease, shall have consented to the change of control to be effected
upon consummation of this Agreement and the Lease shall be in full force and
effect upon and as of the Closing.
(q) IHCS Contribution. Mr. Tannebaum shall have
contributed all of the issued and outstanding capital stock of IHCS to Dental
Care prior to the Closing Date.
Section 7.02. Conditions to the Obligations of the Sellers. The
obligations of the Sellers to consummate the transactions contemplated by this
Agreement are subject to the fulfillment, prior to or at the Closing, of the
following conditions precedent:
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(a) Representations; Warranties; Covenants. Each of the
representations and warranties of CompDent and American Prepaid contained in
this Agreement shall be true and correct in all material respects on and as of
the Closing Date, with the same effect as though made on and as of the Closing
Date (it being understood that representations and warranties made "as of the
date hereof" shall be deemed to have been made as of the Closing Date and that
the last sentence of Section 4.07 shall not be subject to the foregoing
requirement); CompDent and American Prepaid shall, on or before the Closing
Date, have performed and satisfied all of its covenants and agreements set
forth herein which by the terms hereof are to be performed and satisfied by
CompDent or American Prepaid on or before the Closing Date; and CompDent and
American Prepaid shall have delivered to the Sellers a certificate signed on
its behalf by its President and dated as of the Closing Date certifying to the
foregoing effect.
(b) Opinion of Counsel and Other Documents. On the
Closing Date, the Sellers shall have received (i) an opinion of counsel for
CompDent and American Prepaid, dated as of the Closing Date and addressed to
the Sellers, substantially in the form attached as Schedule 7.02(b) hereto and
(ii) such other certificates and documents as counsel to the Sellers shall have
reasonably requested from American Prepaid.
(c) No Actions or Proceedings. No action or proceeding
by or before any court, administrative body or governmental agency shall have
been instituted or threatened which seeks to enjoin, restrain or prohibit, or
might result in damages in respect of, or which claims that any person other
than Sellers is entitled to any of the proceeds of the sale of the Shares and
Options pursuant to, this Agreement or the complete consummation of the
transactions as contemplated by this Agreement and which would in the
reasonable judgment of the Sellers make it inadvisable to consummate such
transactions. No law or regulation shall be in effect and no court order shall
have been entered in any action or proceeding instituted by any party which
enjoins, restrains or prohibits this Agreement or the complete consummation of
the transactions as contemplated by this Agreement.
(d) Approvals and Consents. The Sellers and the
Companies shall have received all required authorizations, waivers, consents
and permits to permit the consummation of the transactions contemplated by this
Agreement (including IDI Approval), in form and substance reasonable
satisfactory to the Sellers, from all third parties, and American Prepaid shall
have complied with Section 6.01.
(e) Deliveries. American Prepaid shall have delivered or
caused to have been delivered the consideration described in Article I hereof.
(f) HSR Act. The waiting period under the HSR Act shall
have expired or been terminated.
(g) Proceedings Satisfactory to Sellers. All proceedings
to be taken by American Prepaid or any of its affiliates in connection with the
consummation of the Closing
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and the other transactions contemplated hereby and all certificates, opinions,
instruments and other documents required to effect the transactions
contemplated hereby reasonably requested by a Seller or a Company will be
reasonably satisfactory in form and substance to Mr. Tannebaum and his counsel.
ARTICLE VIII. TERMINATION OF AGREEMENT
Section 8.01. Termination. This Agreement may be terminated any
time prior to the Closing Date as follows:
(a) With the mutual consent of the Representative,
CompDent and American Prepaid.
(b) By either CompDent and American Prepaid or the
Representative, if the Closing has not occurred on or before August 31, 1996
(subject to Section 1.03).
(c) By either CompDent and American Prepaid or the
Representative, if the Closing has not occurred on or before the twentieth day
after the first day on which all of the conditions set forth in Sections
7.01(d)(i), 7.01(j), 7.02(d) (as to IDI approval) and 7.02(f) have been
satisfied.
(d) By either CompDent and American Prepaid or the
Representative, if the Department of Insurance of the State of Illinois
disapproves in writing the application for transfer of control of IHCS on Form
A of CompDent and American Prepaid and the Department has not withdrawn such
disapproval within 20 days after the date on which CompDent and American
Prepaid and the Representative receive notice of such written disapproval.
(e) By CompDent and American Prepaid, if there has been a
material misrepresentation or breach of warranty on the part of either of the
Sellers or the Companies in the representations and warranties contained herein
or a material breach of covenants on the part of any Seller or Company and the
same has not been cured within 30 days after notice thereof. In the event of
any termination pursuant to this Section 8.01(e), written notice setting forth
the reasons therefor shall forthwith be given by CompDent and American Prepaid
to the Representative and the Companies.
(f) By the Representative, if there has been a material
misrepresentation or breach of warranty on the part of CompDent or American
Prepaid in the representations and warranties contained herein or a breach of
Section 1.02 or a material breach of any of the other covenants set forth
herein on the part of CompDent or American Prepaid and (with respect to the
latter case) the same has not been cured within 30 days after notice thereof.
In the event of
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any termination pursuant to this Section 8.01(f), written notice setting forth
the reasons therefor shall forthwith be given by the Representative to CompDent
and American Prepaid.
Notwithstanding anything herein to the contrary, the right to
terminate this Agreement under paragraphs (b), (c), (d), (e) or (f) of this
Section 8.01 shall not be available to any party to the extent the failure of
such party, respectively, to fulfill any of its obligations under this
Agreement has been the cause of, or resulted in, the failure of the Closing to
occur on or before such date (as a result, for example, of an action or failure
to act causing a failure of a condition precedent).
Section 8.02. Effect of Termination. All obligations of the
parties hereunder shall cease upon any termination pursuant to Section 8.01,
provided, however, that (i) the provisions of this Article VIII, Sections 6.02,
6.03, 9.04(c) and 10.05 hereof (provided that in the case of any such
termination, the Companies shall be permitted to pay expenses of the Sellers in
connection with the transactions contemplated hereby) and the last sentence of
Section 9.04 hereof shall survive any termination of this Agreement in any
event; (ii) nothing in this Section 8.02 shall relieve any party from any
liability for a material error or omission in any of its representations or
warranties contained herein or a material failure to comply with any of its
covenants, conditions or agreements contained herein and (iii) any party may
proceed as further set forth in Section 8.03 below.
Section 8.03. Right to Proceed. Anything in this Agreement to the
contrary notwithstanding, if any of the conditions specified in Section 7.01
hereof have not been satisfied, (i) the Sellers and the Companies shall deliver
to CompDent and American Prepaid at Closing a certificate setting forth any
breach of this Agreement which relates to such unsatisfied condition or
conditions and (ii) CompDent and American Prepaid shall have the right to
proceed with the transactions contemplated hereby, thereby waiving any of their
respective rights hereunder with respect to the breach or breaches set forth in
such certificate, or terminate this Agreement and seek to collect damages with
respect to such breach or breaches, if any. If any of the conditions specified
in Section 7.02 hereof have not been satisfied, (i) CompDent and American
Prepaid shall deliver to the Representative at Closing a certificate setting
forth any breach of this Agreement which relates to such unsatisfied condition
or conditions and (ii) the Representative shall have the right to proceed with
the transactions contemplated hereby, thereby waiving any of Sellers' rights
hereunder with respect to the breach or breaches set forth in such certificate,
or terminate this Agreement and seek to collect damages with respect to such
breach or breaches, if any. A certificate that is delivered pursuant to this
Section 8.03 shall reference the particular Section or Sections of this
Agreement to which each breach relates and describe in reasonable detail the
respective breach.
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ARTICLE IX. SURVIVAL; INDEMNIFICATION
Section 9.01. Survival of Representations and Warranties. All
representations, warranties, agreements, covenants and obligations herein or in
any schedule or certificate delivered by any party incident to the transactions
contemplated hereby are material and may be relied upon by the party receiving
the same and shall survive the Closing regardless of any investigation by or
knowledge of such party and shall not merge into the performance of any
obligation by any party hereto, subject to the provisions and limitations of
this Article IX. Mr. Tannebaum and Mr. Philip- Sorensen state, and CompDent
and American Prepaid acknowledge, that neither Mr. Tannebaum nor Mr.
Philip-Sorensen make or join into, directly or indirectly, any of the
Companies' representations, warranties, agreements, covenants or obligations in
connection with the transactions contemplated in this Agreement or any
schedule, certificate or other agreement delivered by the Companies hereunder.
Accordingly, Mr. Tannebaum only makes the representations and warranties in
Sections 2.02 and 2.03 and Mr. Philip-Sorensen only makes the representations
and warranties in Sections 3.02, 3.03 and 3.07; and Mr. Tannebaum and Mr.
Philip-Sorensen make only those agreements and covenants expressly made by them
in this Agreement. Notwithstanding the foregoing, as a material inducement to
CompDent and American Prepaid to enter into this Agreement, pursuant to the
terms set forth in this Article IX, Mr. Tannebaum is agreeing to provide
indemnification with respect to breaches of the Companies' as well as the
Sellers' own individual representations, warranties, covenants and agreements
in connection with the transactions contemplated by this Agreement,
irrespective of his knowledge or the scope of his direct representations, and
with the objective of assuming responsibility for such matters in favor of
CompDent and American Prepaid as a matter of risk allocation in the event of
any breach thereof.
Section 9.02. Indemnification by Mr. Tannebaum. Mr. Tannebaum, on
behalf of himself, and his respective successors, executors, administrators,
estates, and permitted assigns as contemplated by Section 10.04, agrees
subsequent to the Closing Date to indemnify and hold harmless CompDent,
American Prepaid and their respective affiliates, stockholders, officers,
directors, employees and agents (individually, a "Buyer Indemnified Party" and
collectively, the "Buyer Indemnified Parties") from and against and in respect
of all losses, liabilities, obligations, damages, deficiencies, actions, suits,
proceedings, demands, assessments, orders, judgments, fines, penalties, costs
and expenses (including reasonable attorneys fees and expenses) whether or not
arising out of third-party claims and including all amounts paid in
investigation, defense or for authorized settlements of the foregoing (a "Loss"
or "Losses") sustained, suffered or incurred by or made against any Buyer
Indemnified Party, as such Losses are incurred, arising out of, based upon or
in connection with (a) any breach of any representation or warranty made by any
Company or any Seller in this Agreement or in any Schedule hereto or in any
certificate delivered pursuant to Section 7.01(a) in connection with the
Closing (collectively, "Buyer Representation and Warranty Claims") and (b) any
breach of any covenant or agreement made by any Seller or any Company in this
Agreement or in any Schedule hereto. Claims under clauses (a) and (b) of this
Section 9.02 are hereinafter collectively referred to as "Buyer Indemnifiable
Losses." Notwithstanding this Section 9.02,
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the term Buyer Indemnifiable Losses shall not include any Loss related to, and
Mr. Tannebaum shall not be obligated to indemnify or otherwise be liable to the
Buyer Indemnified Parties with respect to, Taxes (as defined in Section 2.13
above) to the extent (i) such Taxes can be reduced by the carryback and use of
any pre-Closing federal income tax net operating loss of Dental Care ("Dental
Care Loss") or (ii) such Taxes could have been reduced by the carryback and use
of the Dental Care Loss if and to the extent the Dental Care Loss (A) had not
been carried forward and used against post-Closing income of Dental Care (or
any affiliate of Dental Care) or (B) had not been reduced through an audit or
other post-Closing adjustment to the Dental Care Loss which results in the
disallowance of any deduction or credit to the extent such disallowance gives
rise to a deduction (including a deduction for amortization or depreciation) or
a credit in any post-Closing tax period of Dental Care or any affiliate.
Section 9.03. Limitations on Indemnification by the Sellers.
(a) Deductible for Buyer Representation and Warranty
Claims. No indemnification shall be payable with respect to Buyer
Representation and Warranty Claims, except to the extent the cumulative amount
of all Buyer Representation and Warranty Claims exceeds Five Hundred Thousand
Dollars ($500,000) in the aggregate (the "Buyer Threshold"), whereupon only the
amount in excess of such Buyer Threshold shall be recoverable as a Buyer
Representation and Warranty Claim.
(b) General Maximum Indemnification. No indemnification
shall be payable with respect to Buyer Representation and Warranty Claims after
and to the extent the cumulative amount of all Buyer Representation and
Warranty Claims exceeds Nineteen Million Five Hundred Thousand Dollars
($19,500,000). In no event shall Mr. Tannebaum have any liability to any Buyer
Indemnifiable Party under this Article IX for consequential, incidental or
punitive damages, regardless of the theory of recovery. The Buyer Indemnified
Parties shall be obligated to use reasonable efforts to mitigate any Buyer
Indemnifiable Loss which forms the basis of any claim for indemnification
hereunder.
(c) Time Limits for Claims. No Buyer Representation and
Warranty Claim may be made by any Buyer Indemnified Party unless the written
notice required by Section 9.06 with respect to such Buyer Representation and
Warranty Claim shall have been received by the Representative on or prior to
the date fifteen (15) months after the Closing Date as to all representations
other than those set forth in Section 2.13; provided, however, that the
limitation of this clause (c) shall not apply to Buyer Representation and
Warranty Claims relating to third party claims by relevant taxing authorities
with respect to the representations and warranties contained in Section 2.13,
indemnification with respect to which shall expire on the fourth anniversary of
the Closing Date. Once a Buyer Indemnified Party provides notice of any claim
hereunder, the limitation period under this Agreement with respect to such
claim shall be tolled and the right to indemnification with respect thereto
shall remain in effect until such matter shall have been finally determined and
disposed of, and any indemnification due in respect thereof shall have been
paid.
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(d) Dollar-for-Dollar Claims. Notwithstanding anything
herein to the contrary, Buyer Indemnified Parties shall not be subject to any
limitation, whether pursuant to this Section 9.03 or otherwise, and shall be
entitled to dollar-for-dollar recovery, in seeking indemnification from the
Sellers with respect to Losses arising from (i) fraud on the part of any
Company or any Seller or (ii) a breach of the representation and warranty
contained in Section 2.02 of this Agreement.
(e) No Limitation of Rights. Notwithstanding anything
herein to the contrary, the limitations set forth in this Section 9.03 shall
apply only with respect to post-Closing indemnification obligations and shall
in no way limit any rights CompDent and American Prepaid may have at law or in
equity prior to the Closing or in the event the Closing does not occur.
(f) Exclusive Remedy after Closing. Indemnification
pursuant to Section 9.02 is the sole and exclusive remedy of the Buyer
Indemnified Parties after the Closing against any Company or any Seller for
matters arising out of the representations, warranties, covenants and
agreements of any Seller or any Company set forth in this Agreement (without
limitation of the rights of American Prepaid, CompDent or the Buyer Indemnified
Parties under any other agreement contemplated hereby as provided in the terms
thereof or by applicable law with respect to any such other agreement).
Section 9.04. Indemnification by CompDent and American Prepaid.
CompDent and American Prepaid, on behalf of themselves and their respective
successors and permitted assigns as contemplated by Section 10.04, jointly and
severally, agree to indemnify and hold harmless the Sellers, and their
successors, executors, administrators, estates and permitted assigns (a "Seller
Indemnified Party" and, collectively, the "Seller Indemnified Parties") from
and against and in respect of all Losses sustained, suffered or incurred by or
made against any Seller Indemnified Party, as such Losses are incurred, arising
out of, based upon or in connection with (a) any breach of any representation
or warranty made by CompDent or American Prepaid in this Agreement or in any
Schedule hereto or in any certificate delivered pursuant to Section 7.02(a) in
connection with the Closing (collectively, "Seller Representation and Warranty
Claims"); (b) any breach of any covenant or agreement made by CompDent or
American Prepaid in this Agreement or in any Schedule hereto; or (c) any untrue
statement or alleged untrue statement of a material fact contained in any
filings contemplated by Section 5.03(o) or any amendment or supplement thereto,
or the omission or alleged omission to state in any such filing a material fact
required to be stated therein or necessary to make the statements therein not
misleading (such claims under clauses (a), (b) or (c) being hereinafter
collectively referred to as "Seller Indemnifiable Claims"). Notwithstanding
clause (c) in the previous sentence, CompDent and American Prepaid will not be
liable to the extent that any such Loss arises out of or is based upon an
untrue statement or omission with respect to financial statements of the
Companies, or with respect to other information which may be provided to
CompDent or American Prepaid on behalf of the Sellers and included in a
registration statement or other filing with the Securities and Exchange
Commission in reliance
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on and in conformity with written information regarding the Sellers or the
Companies which may be provided specifically for inclusion therein.
Section 9.05. Limitations on Indemnification by CompDent and American
Prepaid.
(a) Damages. In no event shall CompDent or American
Prepaid have any liability to any Seller Indemnified Party under this Article
IX for consequential, incidental or punitive damages, regardless of the theory
of recovery. Each Seller Indemnified Party agrees to use reasonable efforts to
mitigate any Seller Indemnifiable Loss which forms the basis of any claim for
indemnification hereunder.
(b) Time Limit for Claims. No Seller Representation and
Warranty Claim may be made by any Seller Indemnified Party unless the written
notice required by Section 9.06 with respect to such Seller Representation and
Warranty Claim shall have been received by American Prepaid on or prior to the
date fifteen (15) months after the Closing Date; provided, however, that the
limitation set forth in this Section 9.05(b) shall not apply to Seller
Representation and Warranty Claims based on any breach of Section 4.03, 4.06 or
4.07, indemnification with respect to which shall expire on the second
anniversary of the Closing Date. Once a Seller Indemnified Party provides
notice of any claim hereunder, the limitation period under this Agreement with
respect to such claim shall be tolled and the right to indemnification with
respect thereto shall remain in effect until such matter shall have been
finally determined and disposed of and any indemnification due in respect
thereof shall have been paid.
(c) No Limitation of Rights. Notwithstanding anything
herein to the contrary, the limitations set forth in this Section 9.05 shall
apply only with respect to post-Closing indemnification obligations and shall
in no way limit any rights any party may have at law or in equity prior to the
Closing or in the event the Closing does not occur.
(d) Exclusive Remedy After Closing. Indemnification
pursuant to Section 9.04 is the sole and exclusive remedy of the Seller
Indemnified Parties against CompDent and American Prepaid after the Closing for
matters arising out of the representations, warranties, covenants and
agreements of CompDent and American Prepaid set forth in this Agreement.
Section 9.06. Notice; Defense of Claims.
(a) Promptly after receipt by an indemnified party of
notice of any claim for a Loss to which the indemnification obligations
hereunder would apply, the indemnified party shall give notice thereof in
writing to the indemnifying party (CompDent and American Prepaid with respect
to claims by any Seller Indemnified Party and the Representative with respect
to claims by any Buyer Indemnified Party), but the failure to so notify the
indemnifying party promptly will not relieve the indemnifying party from any
liability except to the extent that the indemnifying party shall have been
prejudiced as a result of the failure or delay in giving such
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<PAGE> 53
notice. Such notice shall state the information then available regarding the
amount and nature of such Loss and shall specify the provision or provisions of
this Agreement under which the claim for the Loss is asserted.
(b) If, with respect to a Loss relating to any claim
asserted by a third party, within 45 days after receiving such notice the
indemnifying party gives written notice to the indemnified party stating that
it disputes and intends to defend against such claim for Loss at its own cost
and expense (subject to a reservation of rights as provided below), then
counsel for the defense shall be selected by the indemnifying party (subject to
the consent of the indemnified party which consent shall not be unreasonably
withheld) and the indemnifying party shall not be required to make any payment
with respect to such claim for Loss as long as the indemnifying party is
conducting a good faith and diligent defense at its own expense; provided,
however, that (i) in the event such Loss is a Buyer Indemnifiable Loss and
either (A) such Buyer Indemnifiable Loss is subject to the Buyer Threshold and
the cumulative amount of all Buyer Representation and Warranty Claims has not
exceeded the Buyer Threshold or (B) such Buyer Indemnifiable Loss relates to a
claim of any governmental agency or authority, including any insurance
regulatory authority, then (1) counsel for the defense shall be jointly
selected by and mutually acceptable to both the indemnified party and the
indemnifying party and (2) notwithstanding anything to the contrary in this
Section 9.06(b), the indemnified party and the indemnifying party shall jointly
control the defense of such claim for Loss, shall share all information and
documentation relating to such claim for Loss, shall keep each other informed
with respect to the status of the defense and the mutual consent of both the
indemnified party and the indemnifying party shall be required for any
significant action to be taken in connection with the defense, including
without limitation, any settlement or settlement discussions relating to such
claim for Loss, (ii) the assumption of the defense of any such claim for Loss
by the indemnifying party shall relate solely to the claim for Loss that is
subject or potentially subject to indemnification, and (iii) prior to such
assumption of defense the indemnifying party shall enter into an agreement with
the indemnified party in form and substance mutually satisfactory to both
parties, satisfaction of which will not be unreasonably withheld by either
party, pursuant to which the indemnifying party unconditionally guarantees the
payment and performance of any liability or obligation which may arise out of
such defense. Notwithstanding the foregoing, in connection with such defense
the indemnifying party may reserve its rights to obtain reimbursement of any
such payments and all other Losses relating to such claim for Loss paid by it
(provided that any such reimbursement shall not include counsel fees and other
costs of defense in any event) from the indemnified party in a separate action
contesting the indemnified party's right to indemnification under the
provisions of this Agreement. The indemnifying party shall have the right,
with the consent of the indemnified party, which consent shall not be
unreasonably withheld, to settle the claim or Loss provided its obligation to
indemnify the indemnifying party therefor will be fully satisfied. The
indemnifying party shall keep the indemnified party apprised of the status of
the claim for Loss and any resulting suit, proceeding or enforcement action,
shall furnish the indemnified party with all documents and information that the
indemnified party shall reasonably request and shall consult with the
indemnified party prior to acting on major matters, including settlement
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<PAGE> 54
discussions. Notwithstanding anything herein stated to the contrary, the
indemnified party shall at all times have the right to fully participate in
such defense at its own expense directly or through counsel; provided, however,
if the named parties to the action or proceeding include both the indemnifying
party and the indemnified party and representation of both parties by the same
counsel would be inappropriate under applicable standards of professional
conduct (as determined by a court in an appropriate proceeding), the expense of
separate counsel for the indemnified party shall be paid by the indemnifying
party. If no such notice of intent to dispute and defend is given by the
indemnifying party, or if such diligent good faith defense is not being or
ceases to be conducted, the indemnified party shall at its expense undertake
the defense of (with counsel selected by the indemnified party), and shall have
the right to enter into a reasonable compromise or settlement of such claim for
Loss; provided, however, that if the indemnified party assumes defense of any
third-party claim, the indemnifying party shall not be liable for any Losses
arising or related to such third-party claim unless (i) the indemnifying party
agrees to be liable therefor or (ii) the indemnifying party is found to be
liable under this Agreement for indemnification for the Losses in a separate
action after all appeals and all other proceedings have been exhausted in the
underlying claim. If such claim for Loss is one that by its nature cannot be
defended solely by the indemnifying party, then the indemnified party shall
make available all information and assistance that the indemnifying party may
reasonably request and shall cooperate with the indemnifying party in such
defense, subject to mutually acceptable agreements regarding privilege and
related matters.
Section 9.07. Tax Effects of Losses; Meaning of After-Tax Basis.
(a) In calculating any Losses for which indemnification
is provided under this Article IX, such indemnification payment shall be made
on an after-tax basis such that the amount of any such losses shall in each
case be reduced to take account of any Tax Benefit to the indemnified party
arising from the payment of or relating to any such Loss, as described in and
subject to Section 9.07(b) below.
(b) For purposes of this Article IX, an indemnification
payment that is to be made on an "after- tax" basis to an indemnified party
shall be made net of Tax Benefits which the indemnified party has received or
is entitled to receive in respect to the Loss giving rise to such payment. As
used herein, the term "Tax Benefit" shall mean the federal, state and local tax
savings that have resulted or will result from any tax deduction or tax credit
that (i) the indemnified party has claimed or is entitled to claim on a
Federal, state or local income tax return filed for the tax year of such party
in which the Loss is paid or incurred and (ii) is directly attributable to such
Loss. The term "Tax Benefit" shall not include any tax savings attributable to
a depreciation, amortization or similar deduction attributable to the required
capitalization of a Loss. It shall be assumed that the indemnified party is
subject to the maximum marginal federal, state and local tax rates for a
corporation doing business in the jurisdiction in which such person has its
principal place of business or primary residence unless the indemnified party's
independent certified public accountant certifies that such indemnified party
is subject to a different rate, in which case such different rate shall apply.
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<PAGE> 55
(c) Each indemnified party agrees that it will, in good
faith, claim on a current basis all deductions to which it is legally entitled
as a result of a Loss. As used herein, "good faith" shall mean the obligation
to claim, for federal, state and local income tax purposes, all tax deductions
and tax credits to which the indemnified party is entitled, and would otherwise
reflect on an income tax return in a manner that is consistent with prior
practice and in accordance with applicable law.
Section 9.08. Post Closing Tax Matters.
(a) American Prepaid shall be responsible for the
preparation and timely filing of all federal, state and local tax returns of
Dental Care and IHCS which are not required to be filed prior to the Closing
Date, except that KPMG Peat Marwick shall be retained to prepare the federal
and state income tax returns of the Companies with respect to calendar 1995 and
the short taxable years commencing January 1, 1996 and ending on the Closing
Date ("1995 and Short Period Returns"). CompDent and American Prepaid agree to
accept without modification the deduction for the payments reflected on
Schedule 6.05 of this Agreement to be claimed by Dental Care on its Short
Period Return as prepared by KPMG Peat Marwick, and CompDent and American
Prepaid otherwise agree to sign and file the 1995 and Short Period Returns as
prepared by KPMG Peat Marwick, subject to their review and reasonable
satisfaction with the other positions taken therein. CompDent and American
Prepaid agree to pay the reasonable fees and expenses incurred in the
preparation of the 1995 and Short Period Returns.
(b) Provided that IHCS does not revoke its S corporation
election with respect to 1996, in preparing the federal and state income tax
returns of IHCS covering calendar year 1996 (including both the period during
which IHCS was owned by Mr. Tannebaum and the period during which IHCS was
owned by American Prepaid), CompDent, American Prepaid and Sellers agree to
make the necessary elections under section 1362(e)(3) of the Internal Revenue
Code not to allocate the income or loss of IHCS for calendar year 1996 on a pro
rata basis between such periods.
(c) CompDent and American Prepaid agree to provide Mr.
Tannebaum with prompt notice of the commencement of any state or federal audit
of any tax returns of Dental Care or IHCS covering any taxable periods
commencing prior to the Closing Date, and Mr. Tannebaum, directly or through
his designated representatives, shall have the right to, and CompDent and
American Prepaid agree to take such reasonable measures as may be necessary to
permit Mr. Tannebaum or his designated representatives to, actively participate
in any such audit or subsequent administrative or judicial proceeding.
CompDent and American Prepaid further agree (i) not to concede, compromise or
settle any issue which may arise on audit which could, directly or indirectly,
give rise to a Tax deficiency against which Mr. Tannebaum has agreed to
indemnify CompDent and American Prepaid under Section 9.02 above without the
prior consent of Mr. Tannebaum and (ii) to permit Mr. Tannebaum, directly or
through his designated representatives, to exclusively control all stages of
all administrative or judicial
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<PAGE> 56
proceedings, to the extent such proceedings involve taxable years of Dental
Care or of IHCS commencing prior to the Closing Date, such control to include
(but not by way of limitation) the exclusive authority to select the forum in
which any issue is contested or to settle or compromise any or all issues which
could create Tax deficiencies with respect to which Mr. Tannebaum has agreed to
indemnify CompDent and American Prepaid in Section 9.02 above; provided,
however, that CompDent and American Prepaid shall have the right to participate
in such audit or subsequent administrative or judicial proceeding, and Mr.
Tannebaum agrees at all times to notify CompDent and American Prepaid of any
significant developments with respect thereto.
(d) CompDent and American Prepaid agree not to extend the
applicable statute of limitations or file any amended return with respect to
any taxable period of Dental Care or IHCS commencing prior to the Closing Date
without the prior written approval of Mr. Tannebaum, which approval shall not
be unreasonably withheld. In the event there is a final redetermination of the
liability of IHCS for any federal or Illinois income taxes with respect to any
period commencing prior to the Closing Date which results in a refund payment,
CompDent or American Prepaid shall promptly pay to Mr. Tannebaum an amount
equal to the amount of such refund, including interest, if such refund is paid
to CompDent or American Prepaid, or permit Mr. Tannebaum to retain any such
refund that is paid directly to him, unless such refund is directly
attributable to the carryback of losses or credits generated after the Closing
Date.
ARTICLE X. MISCELLANEOUS
Section 10.01. Law Governing. This Agreement shall be construed
under and governed by the internal laws, and not the law of conflicts, of the
State of Illinois.
Section 10.02. Notices. Any notice, request, demand or other
communication required or permitted hereunder shall be in writing and shall be
deemed to have been given if delivered or sent by facsimile transmission, upon
receipt, or if sent by registered or certified mail upon the sooner of the
expiration of three days after deposit in United States post office facilities
properly addressed with postage prepaid or acknowledgment of receipt, as
follows:
<TABLE>
<S> <C>
To CompDent or
American Prepaid: CompDent Corporation
American Prepaid Professional Services, Inc.
8800 Roswell Road, Suite 244
Atlanta, GA 30350
Attention: Phyllis A. Klock, Senior Vice President
and Bruce A. Mitchell, Esq.
Facsimile: (770) 992-4349
</TABLE>
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<PAGE> 57
<TABLE>
<S> <C>
with a copy to: Goodwin, Procter & Hoar, LLP
Exchange Place
Boston, MA 02109-2881
Attn: John R. LeClaire, P.C.
Facsimile: (617) 523-1231
To the Sellers: Theodore Tannebaum
875 North Michigan Avenue
Suite 2930
Chicago, IL 60611-1901
Facsimile: (312) 397-2634
Sven Philip-Sorensen
Bramley Cottage
Kemerton Near Tewkesbury
Glos GL20-7HY
England
Telecopier: (312) 397-2634 (c/o Ted Tannebaum)
with a copy to: Grippo & Elden
227 West Monroe Street, Suite 3600
Chicago, IL 60606
Attn: Theodore W. Grippo, Esq.
Facsimile: (312) 558-1195
with a copy to: Hopkins & Sutter
Three First National Plaza
Chicago, IL 60602
Attn: William G. McMaster, Jr., Esq.
Facsimile: (312) 558-6538
</TABLE>
or to such other address of which any party may notify the other parties as
provided above.
Section 10.03. Prior Agreements Superseded. This Agreement, the
Schedules and any Exhibits hereto, and any other documents delivered
contemporaneously which refer to this Agreement represent the entire agreement
of the parties with respect to the subject matter hereof and supersedes all
prior understandings and agreements among the parties relating to the subject
matter hereof.
Section 10.04. Assignability. This Agreement shall be assignable by
CompDent or American Prepaid prior to the Closing to a Subsidiary of American
Prepaid; provided, however, that such assignment shall not release CompDent or
American Prepaid from its obligations hereunder or CompDent from its guaranty
of American Prepaid's obligations
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hereunder, and provided further that CompDent and American Prepaid shall first
obtain all necessary government approvals and consents and make all government
filings. This Agreement shall not otherwise be assignable by CompDent or
American Prepaid without the prior written consent of the Representative, or
assignable by the Sellers or the Companies at any time, without the prior
written consent of CompDent and American Prepaid, except for an assignment by
CompDent or American Prepaid in connection with a sale of substantially all of
the assets of CompDent or American Prepaid. This Agreement (including without
limitation the provisions of Article IX) shall be binding upon and enforceable
by, and shall inure to the benefit of, the parties hereto and their respective
successors, heirs, executors, administrators and permitted assigns, and no
others. Notwithstanding the foregoing, nothing in this Agreement is intended
to give any Person not named herein the benefit of any legal or equitable
right, remedy or claim under this Agreement, except as expressly provided
herein.
Section 10.05. Fees and Expenses. CompDent and American Prepaid
shall each pay their own expenses and costs (including without limitation fees
and expenses of their counsel, accountants and investment bankers) associated
with the preparation of this Agreement and the consummation of the transactions
contemplated hereby including regulatory filing fees relative to IDI and HSR
approvals, if any, required to be obtained by CompDent or American Prepaid.
The Sellers shall pay all of their fees and expenses and all fees and expenses
of the Companies (including without limitation fees and expenses of counsel,
accountants and investment bankers) in connection with the preparation of this
Agreement and the consummation of the transactions contemplated hereby, and no
such fees or expenses shall be paid for or reflected in any account of either
Company (or, if so paid or included, Mr. Tannebaum agrees to reimburse the full
amount thereof at the Closing).
Section 10.06. Publicity and Disclosures. A joint initial press
release shall be made at the time of execution of this Agreement announcing
that this Agreement has been signed. Such press release shall be in form and
substance reasonably acceptable to the parties hereto. Thereafter, until the
Closing Date, so long as this Agreement is in effect, none of the parties
hereto nor any of their respective stockholders, subsidiaries, affiliates,
officers, directors or employees shall issue or cause the publication of any
press release or other announcement with respect to this Agreement or the other
transactions contemplated hereby without the prior written consent of the other
parties hereto, which consent shall not be unreasonably withheld, except to the
extent disclosure is required by any applicable law or regulation or by any
court or authorized administrative or governmental agency and except as
contemplated by Section 6.02.
Section 10.07. Captions and Gender. The captions in this Agreement
are for convenience only and shall not affect the construction or
interpretation of any term or provision hereof. The use in this Agreement of
the masculine pronoun in reference to a party hereto shall be deemed to include
the feminine or neuter pronoun, as the context may require.
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Section 10.08. Execution in Counterparts. For the convenience of the
parties and to facilitate execution, this Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same document.
Section 10.09. Certain Remedies; Severability. It is specifically
understood and agreed that any breach of this Agreement by any of the parties
hereto (including any breach of Article II by the Sellers) will result in
irreparable injury to the aggrieved party, that the remedy at law alone will be
an inadequate remedy for such breach and that, in addition to any other remedy
for such breach and that, in addition to any other remedy it may have, such
aggrieved party shall be entitled to enforce the specific performance of this
Agreement by the breaching party and to seek both temporary and permanent
injunctive relief, without the necessity of proving actual damages, but without
limitation of their rights to recover such damages. In case any of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, any such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement, but this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had been limited or modified (consistent with its
general intent) to the extent necessary to make it valid, legal and
enforceable, or if it shall not be possible to so limit or modify such invalid,
illegal or unenforceable provision or part of a provision, this Agreement shall
be construed as if such invalid, illegal or unenforceable provision or part of
a provision had never been contained in this Agreement.
Section 10.10. Amendments; Waivers. This Agreement may not be
amended or modified except by a writing duly and validly executed by Mr.
Tannebaum, as a Seller and as the Representative, the Companies, CompDent and
American Prepaid, provided, however, that Mr. Tannebaum and American Prepaid
may amend this Agreement to extend the time for performance with respect to any
provision herein contained without the consent of any other party. Any party
hereto may waive any covenant or condition intended for its benefit in its
discretion, but delay on the party of any party in exercising any right, power
or privilege hereunder shall not operate as a waiver thereof, nor shall any
waiver on the part of any party of any such right, power or privilege, preclude
any further exercise thereof or the exercise of any other such right, power or
privilege. The rights and remedies of any party arising out of or otherwise in
respect of any inaccuracy in or breach of any representation or warranty, or
any failure to perform or comply with any covenant or agreement, contained in
this Agreement shall in no way be limited by the fact that the act, omission,
occurrence or other state of facts upon which any claim of any such inaccuracy,
breach or failure is based may also be the subject matter of any other
representation, warranty, covenant or agreement contained in this Agreement (or
in any other agreement between the parties) as to which there is no inaccuracy,
breach or failure.
Section 10.11. Consent to Jurisdiction. Each of the parties hereto
submits to the exclusive jurisdiction of any state or federal court of
competent jurisdiction sitting in the Northern District of the State of
Illinois, in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or proceeding may
be heard
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<PAGE> 60
and determined in any such court. Each party waives any defenses of
inconvenient forum to the maintenance of any action or proceeding so brought
and waives any bond, surety or other security that might be required of any
other party thereto. Each party agrees that a final judgment subject to all
appeals being exhausted in any action or proceeding so brought shall be
conclusive.
Section 10.12. Schedules. The Schedules to this Agreement are a part
of this Agreement as if set forth in full herein. Any reference to this
Agreement or any provision hereof shall be deemed to include a reference to the
Schedules hereto. The information included in each Schedule is hereby
incorporated by reference into each other Schedule hereto, so that each
representation and warranty contained herein shall be deemed to refer to and
incorporate the information contained in all Schedules and each Schedule or
Section of the Disclosure Schedule shall be deemed to incorporate the relevant
information contained in each other such Section or Schedule. The parties also
acknowledge the recitals and incorporate them in this Agreement.
Section 10.13. Section 338(h)(10) Election. Each of the parties
hereto agrees that he or it will not make any election under Section 338(h)(10)
of the Internal Revenue Code of 1986, as amended, with respect to the
transactions contemplated hereby.
Section 10.14. CompDent Guaranty. CompDent unconditionally
guarantees to the Sellers the performance by American Prepaid of its
obligations under this Agreement, including without limitation payment of any
amounts payable by American Prepaid under this Agreement when and as such
payment becomes due and payable in accordance with the terms of this Agreement.
This guaranty is an absolute, unconditional and continuing guaranty of the
performance of such obligations as if CompDent were the primary obligor with
respect to such obligations, and is in no way conditioned upon any requirement
that the Sellers first attempt to seek performance by American Prepaid.
Section 10.15. IHCS Liability Limit. IHCS shall not make any payment
to CompDent or American Prepaid under or in connection with this Agreement,
whether or not it may otherwise be liable therefor, unless such payment is
permitted under Sections 5/131.20 and 5/131.20a of the Illinois Insurance Code.
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<PAGE> 61
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed as of the date set forth above.
<TABLE>
<S> <C>
[CORPORATE SEAL] COMPDENT CORPORATION
ATTEST:
/s/ Phyllis Klock By: /s/ David Klock
- ----------------------------------------------- -----------------------------------------------
Name: David Klock
Title: Chairman & CEO
[CORPORATE SEAL] AMERICAN PREPAID PROFESSIONAL SERVICES, INC.
ATTEST:
/s/ Phyllis Klock By: /s/ David Klock
- ----------------------------------------------- -----------------------------------------------
Name: David Klock
Title: Chairman & CEO
DENTAL CARE PLUS MANAGEMENT, CORP.
By: /s/ Richard Sawicz
- ----------------------------------------------- -----------------------------------------------
Name: Richard Sawicz
Title: President
</TABLE>
<PAGE> 62
<TABLE>
<S> <C>
[CORPORATE SEAL] I.H.C.S., INC.
ATTEST:
By: /s/ Richard Sawicz
- ----------------------------------------------- -----------------------------------------------
Name: Richard Sawicz
Title: President
SELLERS:
/s/ Theodore Tannebaum
--------------------------------------------------------
Theodore Tannebaum
/s/ Sven Philip-Sorensen
--------------------------------------------------------
Sven Philip-Sorensen
</TABLE>
