SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 4, 1997
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GENTLE DENTAL SERVICE CORPORATION
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(Exact name of registrant as specified in its charter)
Washington 333-13529 91-1577891
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(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File No.) Identification No.)
22800 Savi Ranch Parkway, Suite 206, Yorba Linda, CA 92887
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(Address of principal executive offices) (Zip Code)
(714) 998-0587
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(Registrant's telephone number, including area code)
No Change
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(Former name, former address and former fiscal year,
if changed since last report)
Item 2. Acquisition or Disposition of Assets
On November 4, 1997, Gentle Dental Service Corporation (the "Company")
completed the merger of GMS Dental Group, Inc. ("GMS"), a privately held
corporation, with and into the Company, with the Company as the surviving
corporation. The merger is being accounted for as a pooling of interests. Upon
consummation of the merger, the Company issued approximately 4,548,200 shares of
its Common Stock in exchange for all of the outstanding stock of GMS. The
Company also assumed outstanding stock options and warrants of GMS which
converted into employee and consultant options to purchase a total of 110,604
shares of Company Common Stock at an average price of $0.48 per share and
warrants to purchase a total of 248,850 shares of Company Common Stock at an
average price of $6.57 per share.
A total of 297,074 of the shares issued in the merger are subject to
repurchase by the Company under previously existing agreements at an average
price of $0.32 per share if, among other things, the Company's EBITDA (on a
combined basis but excluding CEO salary and related expense) for 1997 does not
exceed $4,723,500. This EBITDA target is not expected to be met and,
accordingly, these shares are expected to be repurchased in early 1998. Another
297,071 of the shares issued in the merger are subject to repurchase by the
Company under the same prior agreements at the same price if, among other
things, the Company's EBITDA (on a combined basis but excluding CEO salary and
related expense) for 1998 does not exceed $12,683,250.
To determine the number of shares issued in the merger, the parties
initially agreed to a 53/47 ratio between the value of the Company's business
and the value of GMS's business based on the relative patient level revenues of
the two companies, assuming the completion of the Company's previously announced
acquisition of Dedicated Dental Systems, Inc. and related dental practices
("DDS"). To determine the final merger ratio, these values were adjusted for the
relative levels of debt, stock options and warrants, and estimated earn-out
obligations of the two companies, as well as for the expected repurchase of
shares in early 1998 as discussed above. Upon consummation of the DDS
acquisition and after repurchase of the shares discussed above, the shares
issued to GMS shareholders in the merger will represent approximately 47.5% of
the outstanding Common Stock.
Prior to the merger, GMS was a dental practice management company providing
management support services to 22 dental offices with approximately 100 dentists
in California, Idaho, and Hawaii. The Company intends to continue the business
of GMS.
Upon consummation of the merger, the board of directors of the Company was
reconstituted to consist of the following directors:
Gerald R. Aaron, DDS Steven R. Bull, DDS
Kenneth D. Hooten Robert Finzi
Paul H. Keckley Michael T. Fiore
Dany Y. Tse, DMD Kathleen D. La Porte
L. Theodore Van Eerden Wayne Posey
Craig W. Wong, DMD Grant Sadler
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Upon consummation of the merger, the executive officers of the Company were
reconstituted to consist of the following:
Dany Y. Tse, DMD Co-Chairman, Founder and President
of Clinical Services Council
Michael T. Fiore Co-Chairman, Chief Executive Officer
and President
L. Theodore Van Eerden Executive Vice President and Chief
Development Officer
Grant Sadler Vice Chairman and Co-Founder
Norman Huffaker Chief Financial Officer
Venture funds affiliated with the Sprout Group received 1,649,563 shares of
Company Common Stock in the merger, which currently represent 21.4% of the
outstanding Common Stock. Directors Robert Finzi and Kathleen D. La Porte are
representatives of the Sprout Group. Mr. Fiore and Mr. Sadler received 333,816
and 395,541 shares of Company Common Stock in the merger, respectively,
currently representing 4.3% and 5.1%, respectively, of the outstanding Common
Stock.
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
Audited Consolidated Balance Sheets of GMS as of September 30, 1997
and December 31, 1996, and related audited Consolidated Statements
of Operations, Stockholders' Equity and Cash Flows of GMS for the
nine months ended September 30, 1997 and for the period from October
11, 1996 (inception) through December 31, 1996.
The foregoing financial statements are not included in this report
and will be filed by amendment to this report on or before January
19, 1998.
(b) Pro forma financial information. Pro forma Balance Sheets as of
September 30, 1997 and December 31, 1996 and pro forma Statements of
Operations for the nine months ended September 30, 1997 and for the
year ended December 31, 1996.
The foregoing pro forma financial statements are not included in
this report and will be filed by amendment to this report on or
before January 19, 1998.
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(c) Exhibits.
2.1 Agreement and Plan of Merger, dated as of October 30, 1997,
between the Company and GMS Dental Group, Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: November 18, 1997
GENTLE DENTAL SERVICE CORPORATION
By L. THEODORE VAN EERDEN
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L. Theodore Van Eerden,
Executive Vice President and Chief
Development Officer
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EXHIBIT INDEX
Exhibit Description
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2.1 Agreement and Plan of Merger, dated as of October 30, 1997, between
the Company and GMS Dental Group, Inc.
The following exhibits and schedules to the Agreement and Plan of
Merger have been omitted and will be provided to the Securities and
Exchange Commission upon request:
Exhibit A Opinion of GMS's Counsel
Exhibit B Employment Agreements
Exhibit C-1 Shareholder Representation Letter
Exhibit C-2 Shareholder Consent
Exhibit D Affiliate Representation Letter
Exhibit E Tax Opinion
Exhibit F Opinion of GDSC's Counsel
Schedule 2.06 GDSC Litigation
Schedule 2.08-2 GDSC Employee Benefits
Schedule 2.08-3 GDSC Employment Agreements
Schedule 2.11 GDSC Changes or Events
Schedule 2.12 GDSC Leases
Schedule 2.13 GDSC Contracts
Schedule 2.23 GDSC Consents
Schedule 3.01 GMS Subsidiaries
Schedule 3.03 GMS Capitalization
Schedule 3.06 GMS Litigation
Schedule 3.08-1 GMS Collective Bargaining Agreements
Schedule 3.08-2 GMS Employee Benefits
Schedule 3.08-3 GMS Employment Agreements
Schedule 3.11 GMS Changes or Events
Schedule 3.12 GMS Leases
Schedule 3.13 GMS Contracts
Schedule 3.18 GMS Certain Interests
Schedule 3.20 GMS Permit Issues
Schedule 3.23 GMS Consents
Schedule 7.09 GMS Affiliates