<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission file number: 0-26090
COMPDENT CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 04-3185995
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
CompDent Corporation
100 Mansell Court East, Suite 400
Roswell, Georgia 30076
(Address of principal executive offices)
(770) 998-8936
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at April 30, 1998
----- -----------------------------
<S> <C>
Common Stock, $.01 par value 10,112,629
</TABLE>
<PAGE> 2
COMPDENT CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page #
<S> <C>
Part I. Financial Information 3
Item 1. Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Part II. Other Information
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports Filed on Form 8-K 14
Signatures 15
Exhibit Index 16
</TABLE>
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PART I. - FINANCIAL INFORMATION
This Quarterly Report on Form 10-Q contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. The Company's actual results
could differ materially from those set forth in the forward-looking statements.
Certain factors that might cause such a difference include, among others, risk
associated with the general competitive and pricing pressures in the
marketplace, the risks associated with the successful completion of new
acquisitions, the effective integration of new acquisitions and continued growth
in the dental coverage marketplace. Other risk factors are described in CompDent
Corporation's Annual Report on Form 10-K for the year ended December 31, 1997 as
filed with the Securities and Exchange Commission.
3
<PAGE> 4
ITEM 1. FINANCIAL STATEMENTS
COMPDENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
-------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 15,568 $ 21,963
Premiums receivable from subscribers 4,556 5,554
Patient accounts receivable, net of allowance for
doubtful accounts of $320 in 1998 and
$1,188 in 1997 2,201 1,668
Income taxes receivable -- 175
Deferred income taxes 5,081 5,081
Other current assets 4,067 2,842
-------- --------
Total current assets 31,473 37,283
-------- --------
Restricted funds 2,234 2,321
Property and equipment, net of accumulated depreciation 8,691 6,292
Excess of purchase price over net assets acquired 100,072 96,296
Noncompetition agreements 168 325
Reinsurance receivable 5,467 5,417
Investment in DHDC 1,500 1,500
Other assets 1,849 1,437
-------- --------
$151,454 $150,871
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Unearned revenue $ 9,231 $ 9,538
Accounts payable and accrued expenses 13,552 14,855
Accrued interest payable 152 109
Dental claims reserves 1,839 1,502
Other current liabilities 63 63
-------- --------
Total current liabilities 24,837 26,067
-------- --------
Aggregate reserves for life policies and contracts 5,355 5,331
Notes payable 55,102 56,595
Deferred compensation expense 287 298
Deferred income taxes 1,887 1,887
Other liabilities 1,217 417
-------- --------
Total liabilities 88,685 90,595
-------- --------
Stockholders' equity:
Common stock 101 101
Additional paid-in capital 97,618 97,618
Retained deficit (34,950) (37,443)
-------- --------
Total stockholders' equity 62,769 60,276
-------- --------
$151,454 $150,871
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
COMPDENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1998 1997
------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Revenues:
Subscriber premiums $35,422 $35,636
Affiliated practice revenue 5,292 --
Other revenue 1,728 2,199
------- -------
Total revenue 42,442 37,835
------- -------
Expenses:
Dental care providers' fees and claim costs 19,428 19,544
Commissions 3,265 3,172
Premium taxes 261 265
DHMI operating expenses 4,605 --
General and administration 8,374 7,860
Depreciation and amortization 1,379 1,321
------- -------
Total expenses 37,312 32,162
------- -------
Operating income 5,130 5,673
------- -------
Other (income) expense:
Interest income (254) (161)
Interest expense 1,013 708
Other, net -- (45)
------- -------
759 502
------- -------
Income before provision for income taxes 4,371 5,171
Income tax provision 1,878 2,332
------- -------
Net income $ 2,493 $ 2,839
======= =======
Net income per common share - basic $ 0.25 $ 0.28
======= =======
Net income per common share - fully diluted $ 0.25 $ 0.28
======= =======
Weighted average common shares outstanding - basic 10,113 10,071
======= =======
Weighted average common shares outstanding - fully diluted 10,175 10,167
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
COMPDENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1998 1997
-------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,493 $ 2,839
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,379 1,348
Gain on sale of property and equipment -- (10)
Deferred income tax expense -- 553
Changes in assets and liabilities:
Premiums receivable from subscribers 465 (1,033)
Income taxes receivable/payable 1,313 856
Other assets (1,687) (662)
Unearned revenue (307) 201
Accounts payable and accrued expenses (1,453) (1,393)
Other liabilities (854) (1,242)
-------- --------
Net cash provided by operating activities 1,349 1,457
-------- --------
Cash flows from investing activities:
Additions to property and equipment (2,838) (873)
Decrease (increase) in restricted cash 87 (2)
Proceeds from sale of property and equipment -- 18
Payments made in connection with proposed business acquisitions -- (242)
Purchase of businesses, net of cash acquired (3,500) (473)
-------- --------
Net cash provided by (used) in investing activities (6,251) (1,572)
-------- --------
Cash flows from financing activities:
Borrowings (repayments) under credit agreement (1,493) (3,663)
Tax benefit realized from exercise of nonqualified stock options -- 583
-------- --------
Net cash used in financing activities (1,493) (3,080)
-------- --------
Decrease in cash and cash equivalents (6,395) (3,195)
Cash and cash equivalents, beginning of period 21,963 26,959
-------- --------
Cash and cash equivalents, end of period $ 15,568 $ 23,764
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 970 $ 718
======== ========
Income taxes $ 434 $ 340
======== ========
Non-cash investing and financing activities:
Stock issued in exchange for business acquired $ 0 $ 1,141
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
COMPDENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 1998
1. BASIS OF PRESENTATION
The unaudited consolidated balance sheet as of March 31, 1998, the
unaudited consolidated statements of operations for the three months ended March
31, 1998 and 1997, and the unaudited consolidated statements of cash flows for
the three months ended March 31, 1998 and 1997, in the opinion of management,
have been prepared on the same basis as the audited consolidated financial
statements and include all significant adjustments, consisting of normal
recurring adjustments, necessary for the fair presentation of the results of the
interim periods. The data disclosed in these notes to the financial statements
for these periods are also unaudited. The consolidated financial statements and
notes thereto should be read in conjunction with the consolidated financial
statements and notes thereto as of December 31, 1997 and 1996, and for the years
ended December 31, 1997, 1996, and 1995, included in the 1997 Annual Report of
CompDent Corporation and Subsidiaries (the "Company", except as the context
otherwise requires) and on Form 10-K. Operating results of the Company for the
three months ended March 31, 1998, are not necessarily indicative of the results
that may be expected for the entire year ending December 31, 1998.
2. BUSINESS COMBINATIONS
Effective March 21, 1997, the Company completed the acquisition of American
Dental Providers, Inc. ("AMDP"), and Diamond Dental & Vision, Inc. ("DDV"). The
aggregate purchase price of $1.7 million consisted of $0.5 million in cash and
$1.2 million of Company common stock issued at fair market value. AMDP provides
managed dental care services through a network of dental care providers, and DDV
provides a vision plan and referral fee-for-service dental plan to the Arkansas
market. The Company funded the cash portion of the purchase with cash available
from operations. The acquisition of AMDP and DDV was accounted for using the
purchase method of accounting with the results of operations of the businesses
acquired included from the effective date of the acquisition. The acquisition
resulted in excess of cost over fair value of net assets acquired of $2.9
million which will be amortized over 40 years. During the second quarter of
1997, the Company revised its allocation of the purchase price of AMDP and DDV
which resulted in a decrease to the excess of purchase price over net assets
acquired of $0.5 million to $2.4 million.
During the fourth quarter of 1997, the Company changed it's policy
regarding the recoverability of goodwill to a discounted projection of future
cash flows using an economic rate of return that would be customary for
evaluating the present value of future cash flows in connection with current
dental benefit company transactions. This resulted in AMDP'S and DDV's
goodwill being reduced to $0.
The following is a summary of assets acquired, liabilities assumed, and
consideration paid in connection with the acquisition:
<TABLE>
<S> <C>
Fair value of assets acquired $ 2,652,000
Cash paid and fair value of stock issued
for assets acquired, net of cash acquired (1,614,000)
Acquisition costs paid (416,000)
-----------
Liabilities assumed $ 622,000
===========
</TABLE>
Effective July 2, 1997, the Company completed the acquisition of 21 dental
facilities from The Workman Management Group, Ltd. ("Workman"). The dental
facilities are located in central and southern Illinois. The purchase price
consisted of $15.5 million in cash and funding for the acquisition was obtained
from cash available from operations and from the Company's revolving line of
credit. In addition, the Company granted an aggregate of 70,000 non-qualified
options to the selling shareholders. Concurrent with the acquisition, the
Company entered into a 40-year agreement to manage the dental practices which
are operating in the dental facilities. The acquisition of Workman was accounted
for using the purchase method of accounting with the results of operations of
the businesses acquired included from the effective
7
<PAGE> 8
date of the acquisition. The acquisition resulted in excess of cost over fair
value of net assets acquired of $15.2 million which will be amortized over 40
years. During the fourth quarter of 1997, the Company revised its allocation
of the purchase price of workman which resulted in an increase to the excess of
purchase price over net assets acquired of $1,780 to $16,980.
The following is a summary of assets acquired, liabilities assumed, and
consideration paid in connection with the acquisition:
<TABLE>
<S> <C>
Fair value of assets acquired $ 18,040,000
Cash paid, net of cash acquired (15,340,000)
Acquisition costs paid (990,000)
------------
Liabilities assumed $ 1,710,000
============
</TABLE>
During the third and fourth quarter of 1997, the Company completed the
acquisition of several dental facilities from three additional dental groups.
Effective July 2, 1997, the Company completed the acquisition of one dental
facility located in southern Florida from the Old Cutler Dental Associates,
P.A. ("Old Cutler"). Effective September 26, 1997, the Company completed the
acquisition of one dental facility located in central Tennessee from Robert T.
Winfree, D.D.S., P.C. ("Winfree"). Effective November 7, 1997, the Company
completed the acquisition of Stratman Management Group ("Stratman") and its six
dental facilities located in Indiana. The purchase price of these facilities
consisted of $4,957 in cash less discharge of liabilities related to the
purchased assets. Funding for the acquisitions was obtained from cash
available from operations and from the Company's revolving line of credit.
Concurrent with the acquisitions, the Company entered into 40-year agreements
to manage the dental practices which are operating in the dental facilities.
Each acquisition was accounted for using the purchase method of accounting with
the results of operations of the businesses acquired included from the
effective date of the acquisition. The acquisitions resulted in excess of cost
over fair value of net assets acquired of $5,490 which will be amortized over
40 years. During the fourth quarter of 1997, the Company revised its
allocation of the purchase prices for Old Cutler, Winfree, and Stratman which
resulted in an increase to the excess of purchase price over net assets acquired
of $38 to $5,528.
The following is a summary of assets acquired, liabilities assumed and
consideration paid in connection with the acquisitions:
<TABLE>
<S> <C>
Fair value of assets acquired, including goodwill $ 6,465,000
Cash paid for assets acquired, net of cash acquired (4,957,000)
Acquisition costs paid (227,000)
------------
Liabilities assumed $ 1,281,000
============
</TABLE>
Effective January 2, 1998, the Company completed the acquisition of five
dental facilities from Michael H. Reznik, D.D.S., P.C. ("Reznik"). The dental
facilities are located in Atlanta, Georgia. The purchase price consisted of $3.5
million in cash less discharge of liabilities related to the purchased assets.
Funding for the acquisition was obtained from cash available from operations and
from the Company's revolving line of credit. Concurrent with the acquisition,
the Company
8
<PAGE> 9
entered into a 40-year agreement to manage the dental practices which are
operating in the dental facilities. The acquisition of Reznik was accounted for
using the purchase method of accounting with the results of operations of the
business acquired included from the effective date of the acquisition. The
acquisition resulted in excess of cost over fair value of net assets acquired of
$4.0 million which will be amortized over 40 years.
The following is a summary of assets acquired, liabilities assumed, and
consideration paid in connection with the acquisition:
<TABLE>
<S> <C>
Fair value of assets acquired $ 4,149,000
Cash paid, net of cash acquired (3,500,000)
Acquisition costs paid (150,000)
-----------
Liabilities assumed $ 499,000
===========
</TABLE>
Unaudited pro forma results of operations of the Company for the three
months ended March 31, 1998 and 1997, are included below. Such pro forma
presentation has been prepared assuming that the AMDP, DDV, Workman, Old Cutler,
Winfree, Stratman and Reznik acquisitions had occurred as of January 1, 1997.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
(in thousands, except per share data) 1998 1997
-------- -------
<S> <C> <C>
Revenues $ 42,442 $42,057
======== =======
Net income $ 2,493 $ 2,422
======== =======
Net income per common share $ .25 $ .24
======== =======
</TABLE>
The pro forma results include the historical accounts of the Company,
historical accounts of the acquired businesses, and pro forma adjustments
including the amortization of the excess purchase price over the fair value of
the net assets acquired, calculation of interest expense on amounts borrowed to
fund these acquisitions and the applicable income tax effects of these
adjustments. The pro forma results of operations are not necessarily indicative
of actual results which may have occurred had the operations of the acquired
companies been combined in prior periods.
3. CONTINGENT LIABILITIES
Management does not believe there are currently any asserted or unasserted
claims that will have a material adverse effect on the financial position
results of operations or cash flows of the Company.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached
consolidated financial statements and notes thereto, and with the Company's
audited financial statements and notes thereto for the year ended December 31,
1997.
Three months ended March 31, 1998 and 1997
Total revenue increased $4.6 million, or 12.2% to $42.4 million in the
first quarter of 1998 as compared to $37.8 million for the same period in 1997.
This increase was attributable to $5.3 million of affiliated practice revenue
from Dental Health Management, Inc. ("DHMI"), the Company's dental practice
management company, which commenced operations in the third quarter of 1997,
which was partially offset by a $0.2 million decrease in subscriber premiums.
Other revenue, which consists of third party administrator fees and indemnity
fees, decreased $0.5 million during the first quarter of 1998 versus the same
period in 1997.
Dental care providers' fees and claim costs decreased $0.1 million, or 0.6%
in the first quarter of 1998 to $19.4 million from $19.5 million for the first
quarter of 1997. Dental care providers' fees represent capitation payments paid
to dentists under the Company's managed dental care plans. Under managed dental
care plans, capitation payments to panel dentists are fixed under the
participating dental agreement regardless of the extent of services provided.
Dental claim costs represent amounts payable to dental care providers under
dental indemnity and specialty insurance plans. Dental care providers' fees and
claim costs were 54.8% of subscriber premiums in both the first quarter of 1998
and the first quarter of 1997.
Commission expense increased $93,000, or 2.9%, to $3.3 million in the first
quarter of 1998 from $3.2 million in the first quarter of 1997. As a percentage
of subscriber premiums, commissions increased to 9.2% in the first quarter of
1998 from 8.9% in the first quarter of 1997. This increase reflects a shift in
emphasis toward reliance on independent agents and away from a direct sales
force.
General and administrative expenses ("G&A") and DHMI operating expenses
increased $5.1 million, or 65.1%, to $13.0 million in the first quarter of 1998
from $7.9 million in the first quarter of 1997. Of the increase, $4.6 million
was the result of expenses related to the generation of affiliated practice
revenue from DHMI. As a percentage of revenues, G&A expenses, excluding DHMI
operating expenses, decreased to 19.7% in the first quarter of 1998 from 20.8%
in the first quarter of 1997. This was the result of the growth in the revenues
at DHM offsetting some of the initial infrastructure.
Depreciation and amortization expense increased $58,000, or 4.4%, to $1.4
million in the first quarter of 1998 from $1.3 million in the first quarter of
1997. The increase was primarily due to additional goodwill obtained as a result
of the acquisitions made by DHMI in the third and fourth quarters of 1997 and
January 1998, which was partially offset by a decrease principally due to the
goodwill impairment the Company realized during the fourth quarter of 1997.
Net interest expense increased $0.3, or 51.2% million to $0.8 million in
the first quarter of 1998 from $0.5 million in the first quarter of 1997. This
increase related principally to interest on additional debt incurred to finance
DHMI acquisitions in the third and fourth quarters of 1997 and first quarter of
1998 offset by the implementation of a cash management system which reduced
outstanding non-interest bearing cash balances. Any future acquisitions may
cause the Company to incur additional indebtedness under its revolving credit
facility or otherwise.
In the first quarter of 1998, the Company's effective income tax rate
decreased to 43.0% compared to 45.1% in the first quarter of 1997. This decrease
resulted from reduced goodwill amortization due to impairment and deductible
goodwill recorded in connection with the asset purchases
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made by DHMI.
As a result of the above mentioned factors, the net income for the first quarter
of 1998 was $2.5 million, or $0.25 per share, compared to net income of $2.8
million, or $0.28 per share, for the same period in 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of cash in the three months ended March 31,
1998, was $1.3 million of cash provided by operating activities. The primary
uses of cash for the period were the acquisition of Reznik and the purchases of
property and equipment.
Cash flows from operating activities were $1.3 million for the three months
ended March 31, 1998, and $1.5 million for the three months ended March 31,
1997. Cash flows from operations consist primarily of subscriber premiums and
investment income net of capitation payments to panel dentists, claims paid,
broker and agent commissions, general and administrative expenses and income tax
payments. The Company receives premium payments in advance of anticipated
capitation payments and claims and invests cash balances in excess of current
needs in interest-bearing accounts.
Cash used in investing activities was $6.3 million and $1.6 million for
the three months ended March 31, 1998 and 1997, respectively. The increase in
cash used during the three months ended March 31, 1998, related primarily to
increased use of cash for acquisitions. Capital expenditures increased $2.0
million during the three months ended March 31, 1998, compared to the three
months ended March 31, 1997, due primarily to purchases of leasehold
improvements and dental equipment for the Company's dental office management
business, and telephone and computer purchases. The Company has entered into a
joint initiative with Golder, Thoma, Cressey, Rauner Fund V ("GTCR"), a leading
private equity firm relating to the development of 35 to 50 de novo dental
offices within the next two years. Under this arrangement, the Company has
agreed to fund certain development costs (including the purchase of dental
equipment, supplies, and leasehold improvements) in an amount equal to amounts
funded by GTCR in connection with the joint initiative, not to exceed $15.0
million. The Company anticipates capital expenditures will continue to increase
as the Company meets its funding obligations under this arrangement.
Cash flows used in financing activities for the three months ended March
31, 1998, was $1.5 million, representing repayments under the Company's
revolving line of credit. For the three months ended March 31, 1997, financing
activities used $3.1 million of cash flow, consisting almost entirely of
repayments under the Company's revolving line of credit.
On June 30, 1995, the Company obtained a reducing revolving $35.0 million
line of credit (the "Credit Facility") from banks. The Credit Facility
subsequently was amended to increase the available line of credit to $65.0
million. The Credit Facility pursuant to a second amendment, entered into on
March 16, 1998 requires a 50% reduction in available borrowings on December 31,
1999, and expiration of the Credit Facility on December 31, 2000. Outstanding
indebtedness under the Credit Facility bears interest, at the Company's option,
at a rate equal to the prime rate plus up to .25% or LIBOR plus up to 1.75%,
with the margin over the prime rate and LIBOR decreasing as the ratio of
consolidated debt to EBITDA decreases. Currently, borrowings under the Credit
Facility bear interest at the LIBOR-based rate. The Credit Facility prohibits
payment of dividends and other distributions and restricts or prohibits the
Company from making certain acquisitions, incurring indebtedness, incurring
liens, disposing of assets or making investments, and requires it to maintain
certain financial ratios on an ongoing basis. The Credit Facility is
collateralized by pledges of the stock of the Company's direct and indirect
subsidiaries. The Company had $55.1 million of borrowings outstanding as of
March 31, 1998, under the Credit Facility.
The Company believes that cash flow generated by operations will be
sufficient to fund its normal working capital needs and capital expenditures for
at least the next 24 months.
11
<PAGE> 12
Historically, the Company's operations have not been capital intensive; however,
the Company's recent initiative in the establishment of dental offices through
its subsidiary operation, DHMI, will present capital needs, the extent of which
is indeterminate. Any acquisitions the Company may consummate in the future may
require additional financing under the Credit Facility or otherwise.
Under applicable insurance laws of most states in which the Company
conducts business, the Company's subsidiaries operating in the particular states
are required to maintain a minimum level of net worth and reserves. The Company
may be required from time to time to invest funds in one or more of its
subsidiaries to meet regulatory capital requirements. Applicable laws generally
limit the ability of the Company's subsidiaries to pay dividends to the extent
that required regulatory capital would be impaired and dividend payments are
further restricted under the Credit Facility.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Board has issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which establishes standards for the way
that public business enterprises report information about operating segments in
annual financial statements and requires selected information about operating
segments in interim financial reports.
This Statement requires that a public business enterprise report financial
and descriptive information about its reportable operating segments. Operating
segments are components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. Generally, financial information is required to be reported on the
basis that it is used internally for evaluating segment performance and deciding
how to allocate resources to segments.
The financial information required includes a measure of segment profit or
loss, certain specific revenue and expense items, segment assets and a
reconciliation of each category to the general financial statements. The
descriptive information required includes the way that the operating segments
were determined, the products and services provided by the operating segments,
differences between the measurements used in reporting segment information and
those used in the general purpose financial statements, and changes in the
measurement of segment amounts from period to period.
This Statement is effective for financial statements for periods beginning
after December 15, 1998, with restatement of earlier periods required in the
initial year of application. This Statement need not be applied to interim
financial statements in the initial year of its application, but comparative
information for interim periods in the initial year of application is to be
reported in financial statements for interim periods in the second year of
application. The Company is currently determining if these disclosure
requirements will be applicable and, therefore, required in future periods.
Because SFAS 131 requires additional disclosure, the adoption of SFAS 131 will
not adversely effect the Company's operating results.
12
<PAGE> 13
The Emerging Issues Task Force (EITF) has issued EITF Issue No. 97-2
("Issue 97-2"), Application of FASB Statement No. 94, Consolidation of All
Majority-Owned Subsidiaries, and APB Opinion No. 16, Business Combinations, to
Physician Practice Management Entities and Certain Other Entities with
Contractual Management Arrangements, that establishes standards for determining
whether a physician practice management group ("PPM") has a controlling
financial interest in a physician practice based on a contractual management
agreement. For purposes of Issue 97-2, the practices of medicine, denistry,
and veterinary science are collectively referred to as "physician practices."
Under Issue 97-2, when such a controlling financial interest exists,
consolidation of the physician practice is required. A controlling financial
interest is defined based on the term of the contractual arrangement, control
over decision making, and the extent of the PPM's financial interest in the
physician practice and is deemed to exist if the following six criteria are met:
1) the contractual arrangement has a term that is either (i) the entire
remaining legal life of the physician practice entity or (ii) a period of 10
years or more; 2) the contractual arrangement is not terminable by the physician
practice except in the case of gross negligence, fraud, or other illegal acts by
the PPM, or bankruptcy of the PPM; 3) PPM has exclusive authority over all
decision making related to ongoing, major, or central operations of the
physician practice, except for the dispensing of medical services; 4) PPM has
exclusive authority over all decision making related to total practice
compensation of the licensed medical professionals as well as the ability to
establish and implement guidelines for the selection, hiring, and firing of
them; 5) PPM's financial interest in the physician practice is unilaterally
salable or transferable by the PPM; 6) PPM's financial interest in the physician
practice provides the PPM with the right to receive income as on-going fees and
as proceeds from the sale of its interest in the physician practice, in an
amount that fluctuates based on the performance of the operations of the
physician practice and the change in the fair value thereof. If the six criteria
are met, then the transaction between the PPM and physician practice in which
the PPM executes a management agreement with the physician practice is
considered to be a business combination to be accounted for under APB 16.
Finally, Issue 97-2 establishes the presumption that an employee of a physician
practice that is consolidated by the PPM should be considered an employee of the
PPM and its subsidiaries for purposes of determining the method of accounting
for stock-based compensation.
For all arrangements that exist on November 20, 1997, this Issue is
effective for financial statements for fiscal years ending after December 15,
1998. The effect of initially applying the consensus may be reported as the
effect of a change in accounting principle or may be retroactively reported by
restating the financial statements of prior periods.
The Company is currently evaluating the four dental acquisitions made
during 1997 to determine compliance with the provisions of Issues 97-2.
YEAR 2000 COMPLIANCE
By the end of 1998, the Company expects that its various administrative
systems will have the capability to process transactions dated beyond 1999. The
costs to complete the Company's efforts to modify or replace such systems are
not expected to be material.
13
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Various legal proceedings have arisen or may arise in the normal course of
business. Management does not believe there are currently any asserted or
unasserted claims that will have a material adverse effect on the financial
position, results of operations, or cash flows of the Company.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
The Company has entered into a five-year Employment Agreement with Keith J.
Yoder, Executive Vice President, Chief Financial Officer and Treasurer. The
Agreement generally provides for a continuation of base salary and continuation
of certain benefits for two years following termination of employment without
cause, in the event of a breach by the Company, or upon a material change in the
duties, title, compensation, and/or location of Mr. Yoder within one year
following a change of control of the Company (as defined). Mr. Yoder is subject
to a two-year restriction on competition with the Company following termination
of employment for any reason. See Exhibit 10.1
ITEM 6. EXHIBITS AND REPORTS FILED ON FORM 8-K
(a) Exhibits.
10.1 Employment Agreement between CompDent Corporation and Mr. Keith
J. Yoder.
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K.
None.
14
<PAGE> 15
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 14, 1998 By: /s/ Keith J. Yoder
---------------------------------------
Keith J. Yoder
Chief Financial Officer and Treasurer
(Signing as duly authorized officer and
chief financial officer)
15
<PAGE> 16
EXHIBIT INDEX
10.1 Employment Agreement between CompDent Corporation and Mr. Keith J.
Yoder.
EX-27 Financial Data Schedule (for SEC use only).
16
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
Employment Agreement, dated this 12th day of January, 1998, between
CompDent Corporation ("CompDent"), and Keith Yoder (the "Executive").
W I T N E S S E T H
WHEREAS, CompDent desires to employ Executive in the capacity and on
the terms and conditions hereinafter set forth and Executive is willing to serve
in such capacity and on such terms and conditions.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto agree as follows:
1. Employment. Subject to the provisions of Section 6, CompDent hereby
employs the Executive and the Executive accepts such employment upon the terms
and conditions hereinafter set forth.
2. Term of Employment. The term of the Executive's employment pursuant
to this Agreement shall be effective as of the date of this Agreement, and shall
remain in effect for a period of five years from said date or until terminated
in accordance with Section 6. The period during which the Executive serves as an
employee of CompDent in accordance with and subject to the provisions of this
Agreement is referred to in this Agreement as the "Term of Employment." Without
the consent of the Executive, the Company may not transfer the Executive during
the Term of Employment to a principal place of employment more than thirty miles
from the city limits of the principal city where Executive is located on the
date of this Agreement ("Location").
3. Duties. During the Term of Employment, the Executive shall report
directly to the Chief Executive Officer of CompDent, and (a) shall serve as
Executive Vice President & Chief Financial Officer of CompDent, (b) shall
perform such duties and responsibilities as may be reasonably determined by the
Chairman of the Board of Directors of CompDent consistent with the Executive's
position as an executive officer of CompDent, provided that such duties and
responsibilities shall be within the general area of the Executive's experience
and skills, (c) upon the request of the Board of Directors of CompDent, shall
serve as an officer and/or director of CompDent and any of its subsidiaries; and
(d) shall render all services incident to the foregoing. The Executive agrees to
use his best efforts in, and shall devote his full working time, attention,
skill and energies to, the advancement of the interests of CompDent and its
subsidiaries and Affiliates and the performance of his duties and
responsibilities hereunder.
<PAGE> 2
4. Compensation.
(a) During the Term of Employment, CompDent shall pay the
Executive a salary (the "Base Salary") at an annual rate as shall be determined
from time to time by the Board of Directors of CompDent, provided, however, that
such rate per annum shall not be less than $200,000.00. Such salary shall be
subject to withholding under applicable law and shall be payable in periodic
installments in accordance with CompDent's usual practice for its senior
executives, as in effect from time to time.
(b) Upon the completion of each calendar year, the Executive
shall be eligible to receive a bonus ("Bonus") provided he is employed by
CompDent at the end of such calendar year to the extent payable pursuant to a
bonus plan then in effect from time to time for executives of CompDent of
equivalent position and title; provided, however, at the end of fiscal year
1998, Executive is guaranteed a bonus equal to 30% of Executive's first year's
Base Salary paid ("Guaranteed Bonus"). Said bonus shall be payable in the first
quarter of each fiscal year.
5. Benefits.
(a) During the Term of Employment, the Executive shall be
entitled to participate in any and all bonus plans, medical, pension and dental
insurance plans and disability income plans as in effect from time to time for
senior executives of CompDent. Such participation shall be subject to (i) the
terms of the applicable plan documents, (ii) generally applicable policies of
CompDent, and (iii) the discretion of the Board of Directors of CompDent or
administrative or other committee provided for in or contemplated by such plan.
(b) CompDent shall promptly reimburse the Executive for all
reasonable business expenses incurred by the Executive during the Term of
Employment in accordance with CompDent's practices for senior executives of
CompDent, as in effect from time to time.
(c) During the Term of Employment, the Executive shall receive
paid vacation annually in accordance with CompDent's practices for senior
executives of CompDent, as in effect from time to time.
(d) During the Term of Employment, the Executive shall receive
a car allowance of at least $800 per month.
(e) Except as contemplated by Sections 5 (b), 5 (c), and 5
(d), compliance with provisions of this Section 5 shall in no way create or be
deemed to create any obligation, express or implied, on the part of CompDent or
any parent, subsidiary or affiliate of CompDent with respect to the continuation
of any benefit or other plan or arrangement maintained as of or prior to the
date hereof or the creation and maintenance of any particular benefit or other
plan or
2
<PAGE> 3
arrangement at any time after the date hereof. Notwithstanding the foregoing,
the benefits provided to the Executive during the Term of Employment will not be
materially less favorable in the aggregate than the benefits in effect for the
executives of CompDent as of the date of this Agreement.
6. Termination of Employment of the Executive. This Agreement and the
Executive's employment with CompDent and its subsidiaries may be terminated as
follows:
(a) At any time by the mutual consent of the Executive and
CompDent.
(b) At any time for "cause" by CompDent upon written notice to
the Executive. For purposes of this agreement, a termination shall be for
"cause" if:
(i) the Executive shall commit an act of fraud,
embezzlement, misappropriation or breach of fiduciary duty against CompDent or
any of its subsidiaries or affiliates or shall be convicted by a court of
competent jurisdiction or shall plead guilty or nolo contendere to any felony or
crime involving moral turpitude;
(ii) the Executive shall commit a material breach of
any of the covenants, terms or provisions of Section 8 hereof;
(iii) the Executive shall commit a material breach of
any of the covenants, terms or provisions hereof (other than pursuant to Section
8 hereof) which breach has not been remedied within thirty (30) days after
delivery to the Executive by CompDent of written notice thereof; or
(iv) the Executive shall have disobeyed reasonable
written instructions from CompDent's Chairman consistent with the terms of this
Agreement and Executive's duties, title, and general area of expertise, or shall
have substantially failed to perform the Executive's duties hereunder, after
written notice and under circumstances effectively constituting a resignation of
the Executive's position with CompDent.
Upon termination for cause as provided in this Section 6 (b), (A) all
obligations of CompDent under this Agreement shall thereupon immediately
terminate other than any obligations with respect to earned but unpaid Base
Salary; provided, however, that the Executive shall not be entitled to receive
any bonus from CompDent with respect to the year during which such termination
occurred, and (B) CompDent shall have any and all rights and remedies under this
Agreement and applicable law.
(c) Upon the earlier death or permanent disability (as defined
below) of Executive continuing for a period of one hundred eighty (180) days.
Upon any such termination of the
3
<PAGE> 4
Executive's employment, all obligations of CompDent under this Agreement shall
thereupon immediately terminate other than any obligations with respect to (i)
earned but unpaid salary including any earned but unpaid bonus from the previous
fiscal year, if applicable, through the date of termination, (ii) bonus payments
with respect to the calendar year which such termination occurred on the basis
of and to the extent contemplated in any bonus plan then in effect with respect
to executive officers of CompDent, pro-rated on the basis of number of days of
the Executive's actual employment hereunder during such calendar year through
such termination, and (iii) in the case of permanent disability continuation of
health insurance benefits until the first anniversary of the date of termination
to the extent permitted under Executive's group health insurance policy. As used
herein, the definition of the term "permanent disability or "permanently
disabled" shall parallel the definition of same as provided under the long-term
disability insurance policy then in effect on executives of the Company. In the
event that no such policy is in existence at the time of the contended
disability, "permanent disability" shall be defined as the inability of the
Executive, by reason of injury, illness or other similar cause, to perform a
major part of his duties and responsibilities in connection with the conduct of
the business and affairs of CompDent.
(d) At any time by the Executive upon sixty (60) days' prior
written notice to CompDent. Upon termination by the Executive as provided in
this Section 6 (d), all obligations of CompDent under this Agreement shall
thereupon immediately terminate other than any obligations with respect to
earned but unpaid Base Salary including any earned but unpaid bonus from the
previous fiscal year, if applicable, it being understood that the Executive
shall not be entitled to receive any bonus from CompDent with respect to the
year during which such termination occurred.
(e) At any time during the Term of Employment without "cause"
(as defined in Section 6 (b)) by CompDent upon sixty (60) days' prior written
notice to the Executive.
(f) The Executive shall have the right to terminate his
employment hereunder upon written notice to the Company in the event of:
(i) a material change in the nature or scope of the
powers, functions, titles, duties or responsibilities of the Executive as in
effect as of January 12, 1998, that is adverse to the Executive;
(ii) without the consent of the Executive, any
transfer of the Executive during the Term of Employment to a principal place of
employment more than thirty (30) miles from the city limits of the principal
city where the Executive is located on the date of this Agreement; or
4
<PAGE> 5
(iii) any other material default by the Company in
the performance of its obligations hereunder,
in each case after the Executive has given written notice to the Company
specifying such default by the Company and giving the Company a reasonable time,
not less than thirty (30) days, to conform its performance to its obligations
hereunder. The failure of the Executive to give notice of any of the foregoing
events shall not under any circumstances constitute a waiver of Executive's
right to terminate his employment and receive the amounts payable under Section
7(a).
(g) Upon termination of the Executive's employment with
CompDent at any time, under this Agreement or otherwise, regardless of the
circumstances thereof, the Executive's obligations under Section 8 hereof shall
survive such termination.
7. Severance Payments.
(a) In the event of termination of the Executive by CompDent pursuant
to Section 6(e), or by Executive pursuant to 6(f), then CompDent shall in lieu
of the payments and arrangements specified above (including, without limitation,
participation in any bonus plan, including that of the Guaranteed Bonus), (i)
pay the Executive severance pay in an amount equal to one (1) times the
Executive's Base Salary on the Termination Date ("Severance Pay"), and (ii)
continue the Executive's health (i.e., medical and dental) insurance as provided
in Section 5(a) for twelve (12) months following the date of such termination to
the extent permitted under applicable law and CompDent's group health insurance
policy. Such Severance Pay shall be payable over twelve (12) months in equal
monthly installments and shall be subject to withholding to the extent required
under applicable law. In the event that Executive's participation in any medical
and/or dental plan or program is barred, CompDent shall arrange to provide
Executive with benefits substantially similar to those which Executive would
otherwise had been entitled to receive under such plans and programs from which
his continued participation is barred. The Severance Pay and continuation of
health benefits contemplated by this Section 7(a) are agreed by the parties
hereto to be in full satisfaction and compromise of any claim arising out of any
termination of the Executive's employment pursuant to Section 6(e) or 6(f).
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise.
(b) Notwithstanding anything herein to the contrary, in the
event the employment of the Executive terminates following a material change in
the duties, title, compensation, and/or location of the Executive, within one
(1) year following any "Change of Control" (as hereinafter defined) involving
CompDent or any entity controlling CompDent ("Parent"), then CompDent shall in
lieu of the payments and arrangements specified above (including without
limitation participation in any bonus plan), (i) pay the Executive severance
5
<PAGE> 6
equal to two (2) times Executive's Base Salary on the Change of Control date
("Separation Pay"), and (ii) continue the Executive's health (i.e., medical and
dental) insurance as provided in Section 5(a) for twelve (12) months following
the date of such termination to the extent permitted under applicable law and
CompDent's group health insurance policy. Such Separation Pay shall be payable
over twelve (12) months in equal monthly installments and shall be subject to
withholding to the extent required under applicable law. In the event that
Executive's participation in any health and/or dental plan or program is barred,
CompDent shall arrange to provide Executive with benefits substantially similar
to those which Executive would otherwise had been entitled to receive under such
plans or programs from which his continued participation is barred. The
Separation Pay and continuation of health benefits contemplated by this Section
7(b) are agreed by the parties hereto to be in full satisfaction and compromise
of any claim arising out of any termination of the Executive's employment
pursuant to a Change of Control. Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise.
(c) Notwithstanding anything herein to the contrary, in the event the
Executive elects to voluntarily terminate his employment pursuant to the
provisions of 6(d) within one (1) year following any "Change of Control" (as
defined herein) involving CompDent or any entity controlling CompDent
("Parent"), then CompDent shall, subject to the limitations set forth below, in
lieu of the payments and arrangements specified herein, (i) pay the Executive
severance equal to one (1) times Executive's Base Salary on the Change of
Control date ("Termination Pay"), and (ii) continue the Executive's health
(i.e., medical and dental) insurance as provided in Section 5(a) for twelve (12)
months following the date of such termination to the extent permitted under
applicable law and CompDent's group health insurance policy. Such Termination
Pay shall be payable over twelve (12) months in equal monthly installments and
shall be subject to withholding to the extent required under applicable law. In
the event that Executive's participation in any health and/or dental plan or
program is barred, CompDent shall arrange to provide Executive with benefits
substantially similar to those which Executive would otherwise had been entitled
to receive under such plans or programs from which his continued participation
is barred. The Termination Pay and continuation of health benefits contemplated
by this Section 7(c) are agreed by the parties hereto to be in full satisfaction
and compromise of any claim arising out of Executive's voluntary termination of
his employment following a Change of Control. Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise. Notwithstanding the above, said Termination Pay
shall only be due and payable in the event Executive remains available for
continued employment for a period of not less than six (6) months following a
Change of Control and during said period offers his full cooperation and
demonstrates a spirit of cooperation in the transition associated with
Executive's termination of employment. Said cooperation shall include the timely
and appropriate discharge of current duties and responsibilities in the best
interests of CompDent.
6
<PAGE> 7
(d) For purposes of this Section 7, the following term shall
have the meanings specified unless defined otherwise herein:
"Change of Control" shall mean shall mean any of the
following events occurring after the date hereof: (A) the direct or indirect
beneficial ownership (within the meaning of Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Regulation 13D-G
thereunder) of a majority of the outstanding Common Stock of American Prepaid is
acquired or becomes held by any person or group of persons (within the meaning
of Section 13(d)(3) of the Exchange Act)(a "Group"), (B) the sale, mortgage,
lease or other transfer to any person or Group in one or more transactions not
in the ordinary course of business of all or substantially all of the assets on
a consolidated basis of Parent, American Prepaid and American Prepaid
subsidiaries (taken as a whole), (C) a change of stock ownership of American
Prepaid of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A promulgated under the Securities Exchange Act of 1994, as
amended ( the "Exchange Act") and any successor Item of a similar nature; or (D)
the acquisition of beneficial ownership, directly or indirectly, by any person
(as such term is used in Sections 13(d) and 14(d) (a) of the Exchange Act) of
securities of American Prepaid representing 50% or more of the combined voting
power of American Prepaid's then outstanding securities.
8. Non-Competition.
(a) During any period in which the Executive serves as an
employee of CompDent and for a period of one (1) year after the date of
termination of the Executive's employment at any time, regardless of the
circumstances thereof, the Executive shall not, without the express written
consent of CompDent, directly or indirectly, engage, participate, invest in, be
employed by or assist, whether as owner, part-owner, shareholder, partner,
director, officer, trustee, employee, agent or consultant, or in any other
capacity, any Person other than CompDent and its Affiliates whose activities,
products, and/or services are in the Designated Industry. Without limiting the
foregoing, the foregoing covenant shall prohibit the Executive during the period
set forth above from (i) hiring or attempting to hire for or on behalf of any
Person in the Designated Industry any officer, Employee, or Affiliated Person of
CompDent or any of its Affiliates, (ii) encouraging for or on behalf of any such
Person in the Designated Industry any officer, Employee, or Affiliated Person to
terminate his relationship or employment with CompDent or any of its Affiliates,
(iii) soliciting for or on behalf of any such Person in the Designated Industry
any customer of CompDent or any of its Affiliates and (iv) diverting to any such
Person in the Designated Industry any customer of CompDent or any of its
Affiliates; provided, however, that nothing herein shall be construed as
preventing the Executive from making passive investments in a Person in the
Designated Industry if the securities of such Person are publicly traded and
such investment constitutes less than five percent of the outstanding shares of
capital stock or comparable equity interests of such Person. As of the date
7
<PAGE> 8
of this Agreement, the Executive is not performing any other duties for, and is
not a party to any similar agreement with, any Person competing with CompDent or
any of its affiliates.
(b) In the course of performing services hereunder and
otherwise, the Executive has had, and it is anticipated that the Executive will
from time to time have, access to confidential records, data, customer lists,
trade secrets and similar confidential information owned or used in the course
of business by CompDent and its subsidiaries and affiliates (the "Confidential
Information"). The Executive agrees (i) to hold the Confidential Information in
strict confidence, (ii) not to disclose the Confidential Information to any
Person (other than in the regular business of CompDent), and (iii) 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 (A) is then generally
known to the public; (B) became or becomes generally known to the public through
no fault of the Executive; or (C) is disclosed in accordance with an order of a
court of competent jurisdiction or applicable law. Upon the termination of the
Executive's employment with CompDent, all data, memoranda, customer lists,
notes, programs and other papers and items, and reproductions thereof relating
to the foregoing matters in the Executive's possession or control, shall be
returned to CompDent and remain in its possession.
(c) For purposes of this Section 8, the following terms shall
have the meanings specified unless defined otherwise herein:
(i) "Affiliates" shall mean any subsidiary company
of CompDent or American Prepaid Professional Services, Inc. (subsidiary company
to CompDent), whether wholly or partially owned, including but not by way of
limitation, Dental Health Management, Inc.
(ii) "Affiliated Person" shall mean any individual,
professional, or otherwise, who is providing, or has provided, during a one-year
period immediately prior to the date of any hiring or solicitation for hire of
such individual, services to any dental office or facility under management by
Dental Health Management, Inc.;
(iii) "Employee" shall mean any individual employed
currently or during a one-year period immediately prior to the date of any
hiring or solicitation for hire of such individual by CompDent or its
Affiliates;
(iv) "Designated Industry" shall mean (A) the
business of providing dental health care services and any and all activities
relating thereto, including, without limitation, the provision and
administration of discount fee-for-service dental plans, prepaid dental plans,
PPO dental plans and indemnity dental plans and operation and/or ownership of
8
<PAGE> 9
dental health care practices, (B) the business of providing dental practice
management, and (C) any other revenue generating business conducted by CompDent
or its Affiliates;
(v) "Person" shall mean an individual, a corporation,
an association, a partnership, an estate, a trust, and any other entity or
organization.
9. Specific Performance: Severability. It is specifically understood
and agreed that any breach of the provisions of this Agreement including,
without limitation, Section 8 hereof by the Executive is likely to result in
irreparable injury to CompDent and its subsidiaries and affiliates, that the
remedy at law alone will be inadequate remedy for such breach and that, in
addition to any other remedy it may have, CompDent shall be entitled to enforce
the specific performance of this Agreement by the Executive and to seek both
temporary and permanent injunctive relief (to the extent permitted by law),
without the necessity of proving actual 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 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.
10. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally or mailed by certified or registered mail (return receipt
requested) as follows:
To CompDent:
100 Mansell Court East
Suite 400
Roswell, Georgia 30076
Attention: Chief Executive Officer
To the Executive:
590 Cambridge Way, NW
Atlanta, Georgia 30328
or to such other address of which any party may notify the other parties as
provided above. Notices shall be effective as of the date of such delivery or
mailing.
9
<PAGE> 10
11. Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, by and between the parties hereto with
respect to the employment of Executive by CompDent and/or its subsidiaries, and
contains all of the covenants and agreements between the parties with respect to
the employment of Executive by CompDent. Each party to this Agreement
acknowledges that no representations, inducements, or other agreements, oral or
otherwise, have been embodied herein, and no other agreement, statement, or
promise not contained in this Agreement shall be valid or binding.
12. Arbitration. Disputes arising out of or relating to this Agreement
shall be determined by binding arbitration in accordance with the then current
Commercial Arbitration Rules of the American Arbitration Association, provided,
however, that any dispute arising out of the non-competition provision of this
Agreement (paragraph 8) shall not be subject to arbitration.
13. Miscellaneous. This Agreement shall be governed by and construed
under the laws of the State of Florida, and shall not be amended, modified or
discharged in whole or in part except by an Agreement in writing signed by both
of the parties hereto. The failure of either of the parties to require the
performance of a term or obligation or to exercise any right under this
Agreement or the waiver of any breach hereunder shall not prevent subsequent
enforcement of such term or obligation or exercise of such right or the
enforcement at any time of any other right hereunder or be deemed a waiver of
any subsequent breach of the provision so breached, or of any other breach
hereunder. This Agreement shall inure to the benefit of successors of CompDent
by way of merger, consolidation or transfer of all or substantially all of the
assets of CompDent, and may not be assigned by the Executive.
IN WITNESS WHEREOF, the parties have executed this Agreement under
seal as of the date first set forth above.
COMPDENT CORPORATION
By: /s/ David R. Klock
---------------------
Name: David R. Klock
Title: Chairman and CEO
EXECUTIVE:
/s/ Keith Yoder
--------------------------
Keith Yoder
10
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