STOCK PURCHASE AGREEMENT
between
GENTLE DENTAL SERVICE CORPORATION
and the sole shareholder of
MANAGED DENTAL CARE OF OREGON, INC.
Dated February 28, 1998
TABLE OF CONTENTS
Page
ARTICLE I Purchase and Sale of MDCO Shares............................... 1
1.01 Purchase and Sale; Tax Election......................... 1
1.02 Purchase Price.......................................... 2
1.03 Instruments of Transfer................................. 2
1.04 Further Assurances...................................... 2
1.05 Closing................................................. 2
1.06 Allocation of Purchase Price............................ 2
ARTICLE II Representations and Warranties of GDSC......................... 2
2.01 Authorization........................................... 2
2.02 Compliance.............................................. 2
2.03 Consents................................................ 3
2.04 Accuracy of Representations and Warranties.............. 3
2.05 Reliance................................................ 3
ARTICLE III Representations and Warranties of MDCO and Shareholder......... 3
3.01 Corporate Existence; Authority.......................... 3
3.02 No Adverse Consequences................................. 4
3.03 Brokers and Finders..................................... 4
3.04 Litigation.............................................. 4
3.05 Compliance with Laws.................................... 4
3.06 Employment Matters...................................... 5
3.07 Financial Statements.................................... 6
3.08 Receivables............................................. 6
3.09 Prepaid Expenses and Other.............................. 6
3.10 Personal Property....................................... 7
3.11 Payables................................................ 7
3.12 Indebtedness............................................ 7
3.13 Other Liabilities....................................... 7
3.14 Absence of Certain Changes or Events.................... 7
3.15 Leases.................................................. 8
3.16 Certain Contracts and Arrangements...................... 8
3.17 Status of Contracts and Leases.......................... 9
3.18 Title and Condition of Tangible Assets.................. 9
3.19 Insurance............................................... 10
3.20 Taxes................................................... 10
3.21 No Restrictions......................................... 11
3.22 Permits and Licenses.................................... 11
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Page
3.23 Certain Payments........................................ 11
3.24 Environmental Conditions................................ 11
3.25 Consents and Approvals.................................. 11
3.26 Records................................................. 12
3.27 Reliance................................................ 12
3.28 Accuracy of Representations and Warranties.............. 12
ARTICLE IV Covenants of MDCO and Shareholder.............................. 12
4.01 Access to Properties, Books and Records................. 12
4.02 Negative Covenants...................................... 12
4.03 Affirmative Covenants................................... 14
4.04 No Negotiations With Others............................. 14
ARTICLE V Joint Covenants................................................ 15
5.01 Governmental Consents................................... 15
5.02 Best Efforts; No Inconsistent Action.................... 15
ARTICLE VI Conditions to Obligations of GDSC.............................. 15
6.01 Governmental Approvals.................................. 15
6.02 Consents................................................ 15
6.03 Representations, Warranties and Covenants............... 16
6.04 Adverse Proceedings..................................... 16
6.05 No Adverse Change....................................... 16
6.06 Opinion of Counsel...................................... 16
6.07 ADC Agreement Closing................................... 16
6.08 Lease 16
6.09 Actions Satisfactory to GDSC's Counsel.................. 16
ARTICLE VII Conditions to Obligations of MDCO.............................. 17
7.01 Representations, Warranties and Covenants............... 17
7.02 Adverse Proceedings..................................... 17
7.03 Opinion of Counsel...................................... 17
7.04 ADC Agreement Closing................................... 17
7.05 Lease................................................... 17
7.06 Actions Satisfactory to ADC's Counsel................... 17
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Page
ARTICLE VIII Termination ............................................... 18
8.01 Right of Parties to Terminate........................... 18
8.02 Effect of Termination................................... 18
ARTICLE IX Survival; Indemnification...................................... 18
9.01 Survival................................................ 18
9.02 Indemnification by MDCO and Shareholder................. 19
9.03 Indemnification by GDSC................................. 19
9.04 Indemnification Procedure............................... 19
9.05 Right of Offset......................................... 21
9.06 Limitations............................................. 21
9.07 Rights Not Exclusive.................................... 21
ARTICLE X Confidentiality; Press Releases................................ 21
10.01 Confidentiality......................................... 21
10.02 Press Releases.......................................... 22
ARTICLE XI Other Provisions............................................... 22
11.01 Benefit and Assignment.................................. 22
11.02 Entire Agreement........................................ 23
11.03 Fees and Expenses....................................... 23
11.04 Amendment, Waiver, etc.................................. 23
11.05 Headings................................................ 23
11.06 Governing Law........................................... 23
11.07 Notices................................................. 23
11.08 Breach; Equitable Relief................................ 24
11.09 Attorneys' Fees......................................... 24
11.10 Counterparts............................................ 25
iii
INDEX OF DEFINED TERMS
Term Location of Definition
- ---- ----------------------
ADC................................................... Introduction
ADC Agreement......................................... Introduction
Closing............................................... 1.05
Closing Date.......................................... 1.05
Code.................................................. 1.01
Contracts............................................. 3.16
Current Balance Sheet................................. 3.07-1
Damages............................................... 9.02-1
ERISA................................................. 3.06-2
ERISA Plans........................................... 3.06-2
Environmental Law..................................... 3.24-2(a)
Financial Statements.................................. 3.07-1
GDSC.................................................. Introduction
GDSC's Indemnified Persons............................ 9.02-1
Hazardous Substance................................... 3.24-2(b)
Leases................................................ 3.15
MDCO.................................................. Introduction
MDCO Shares........................................... Introduction
Material Adverse Change............................... Article III Introduction
Material Adverse Effect............................... Article III Introduction
Permits............................................... 3.22
Policies.............................................. 3.19
Purchase Price........................................ 1.02
Real Property......................................... 3.15
Related Documents..................................... 9.01
Returns............................................... 3.20-1
Shareholder........................................... Introduction
Tangible Personal Property............................ 3.10
Taxes................................................. 3.20-3
Third Party Claims.................................... 9.04-1(a)
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LIST OF EXHIBITS
Exhibit Item First Reference
- ------- ---- ---------------
A Opinion of MDCO's Counsel 6.06
B Opinion of GDSC's Counsel 7.03
LIST OF SCHEDULES
Schedule Content
- -------- -------
1.06 Purchase Price Allocation
3.04 Litigation
3.06-2 Employee Benefits
3.06-3 Employment Manuals and Policies
3.06-4 Compensation
3.07 Financial Statements
3.08 Receivables
3.09 Prepaid Expenses and Other
3.10 Tangible Personal Property
3.11 Payables
3.12 Indebtedness
3.13 Other Liabilities
3.15 Leases
3.16 Contracts
3.19 Insurance
3.25 Consents and Approvals
v
STOCK PURCHASE AGREEMENT
DATED: February 28, 1998
BETWEEN: GENTLE DENTAL SERVICE CORPORATION,
a Washington corporation
900 Washington Street, Suite 1100
Vancouver, WA 98660
Telecopy No.: (360) 750-8667 "GDSC"
AND: MANAGED DENTAL CARE OF OREGON, INC.
an Oregon corporation
215 North Blaine Street
Newberg, OR 97132
Telecopy No.: (503) 537-0300 "MDCO"
AND: Gerald M. Bieze, DDS "Shareholder"
Shareholder is the owner of all of the issued and outstanding capital stock
of MDCO. Shareholder desires to sell, and GDSC desires to purchase, all of the
shares of capital stock of MDCO outstanding on the Closing Date (the "MDCO
Shares") on the terms and conditions set forth in this Agreement, thereby
causing MDCO to become a wholly-owned subsidiary of GDSC. Shareholder is also
the owner of all of the issued and outstanding capital stock of Affordable
Dental Care, Inc., an Oregon corporation ("ADC"). Shareholder and GDSC are
signing an agreement for the purchase and sale of substantially all of the
assets of ADC (the "ADC Agreement") at the same time that they are signing this
Agreement.
In consideration of the mutual promises and covenants contained in this
Agreement, the parties agree as follows:
ARTICLE I
Purchase and Sale of MDCO Shares
1.01 Purchase and Sale; Tax Election. Subject to all the terms and
conditions of this Agreement and for the consideration herein stated, on the
"Closing Date," as that term is defined in Section 1.05, Shareholder agrees to
sell, convey, assign, transfer and deliver the MDCO Shares to GDSC, and GDSC
agrees to purchase and accept the MDCO Shares from Shareholder. In connection
with purchase and sale of the MDCO Shares, Shareholder shall join with GDSC in
timely filing an election under Section 338(h)(10) of the Internal Revenue Code
of 1986, as amended (the
"Code"), in accordance with Treas Reg ss.1.338(h)(10)-1 to have the transaction
taxed as an asset purchase, and shall take all other similar actions required to
give effect to the election for state and local tax purposes to the greatest
extent allowed by law.
1.02 Purchase Price. The total purchase price for the MDCO Shares (the
"Purchase Price") shall be $950,000, payable by cashiers check or wire transfer
on the Closing Date.
1.03 Instruments of Transfer. On the Closing Date, Shareholder shall
deliver to GDSC certificates for all of the MDCO Shares, duly endorsed for
transfer.
1.04 Further Assurances. Shareholder agrees that, at any time and from time
to time on and after the Closing Date, he will, upon the request of GDSC and
without further consideration, take all steps reasonably necessary to place GDSC
in possession and operating control of the business of MDCO and the assets and
properties of MDCO.
1.05 Closing. The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Stoel Rives LLP,
900 SW Fifth Avenue, Suite 2300, Portland, Oregon, effective as of the close of
business on the last day of the month in which all conditions to the Closing are
satisfied (other than those conditions that by their terms are to occur at the
Closing) or at another date, time and place agreed upon in writing by the
parties (the "Closing Date").
1.06 Allocation of Purchase Price. The Purchase Price shall be allocated
among the assets of MDCO in accordance with Schedule 1.06, and GDSC and MDCO
shall be bound by that allocation in reporting the transactions contemplated by
this Agreement to any governmental authority (including without limitation the
Internal Revenue Service).
ARTICLE II
Representations and Warranties of GDSC
GDSC represents and warrants to MDCO and Shareholder as follows:
2.01 Authorization. GDSC is a corporation, duly organized, validly existing
and in good standing under the laws of the State of Washington and has all
requisite corporate power and authority to own and operate its properties and to
carry on its business as now conducted. GDSC has taken all corporate action
necessary to authorize its execution, delivery and performance of this
Agreement. GDSC has full corporate power and authority to enter into this
Agreement and carry out the terms hereof. This Agreement has been duly executed
and delivered by GDSC and is binding upon and enforceable against GDSC in
accordance with its terms, except as enforceability may be limited or affected
by applicable bankruptcy, insolvency, reorganization, or other laws of general
application relating to or affecting creditors' rights generally and except as
enforceability may be limited by rules of law governing specific performance,
injunctive relief or other equitable remedies.
2
2.02 Compliance. The execution, delivery and performance of this Agreement
by GDSC, the compliance by GDSC with the provisions of this Agreement and the
consummation of the transactions described in this Agreement will not conflict
with or result in the breach of any of the terms or provisions of or constitute
a default under:
2.02-1 the articles of incorporation or bylaws of GDSC;
2.02-2 any note, indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument to which GDSC is a party or by which GDSC
is bound; or
2.02-3 any statute or any order, rule, regulation or decision of any
court or regulatory authority or governmental body applicable to GDSC.
2.03 Consents. Except for the consent of GDSC's principal bank, no consent,
approval, authorization, order, designation or declaration of any court or
regulatory authority or governmental body, federal or other, or third person is
required to be obtained by GDSC for the consummation of the transactions
described in this Agreement.
2.04 Accuracy of Representations & Warranties. None of the representations
or warranties of GDSC contains or will contain any untrue statement of any
material fact or omits or misstates a material fact necessary to make the
statements contained in this Agreement not misleading. GDSC does not know of any
fact that has resulted or that, in the reasonable judgment of GDSC will result,
in any material adverse change in GDSC's business, results of operation,
financial condition or prospects that has not been set forth in this Agreement.
2.05 Reliance. GDSC recognizes and agrees that, notwithstanding any
investigation by Shareholder, Shareholder is relying upon the representations
and warranties made by GDSC in this Agreement.
ARTICLE III
Representations and Warranties of MDCO and Shareholder
As used in this Agreement, "Material Adverse Effect" means a material
adverse effect on the business, results of operations, financial position,
assets or prospects of MDCO, which shall in any event include any adverse effect
on the assets, revenue or net income of MDCO in excess of $50,000; and "Material
Adverse Change" means any change that has resulted, will result or is likely to
result in a Material Adverse Effect. MDCO and Shareholder represent and warrant
to GDSC as follows:
3.01 Corporate Existence; Authority. MDCO is a corporation duly organized,
validly existing and in good standing under the laws of the State of Oregon, and
MDCO has all necessary corporate power and authority to own, lease and operate
its properties and assets and to carry on its business as now conducted and as
proposed to be conducted. Shareholder owns all of the issued and outstanding
stock of MDCO, consisting of 100 shares of common stock. Neither MDCO nor
3
Shareholder is party to any subscription, option, warrant, call, right,
agreement or commitment (including any right of conversion or exchange under any
outstanding security or other instrument) relating to the issuance, sale,
delivery or transfer of any of MDCO's capital stock. MDCO has no subsidiaries
and has no investments in any corporation, partnership, association, joint
venture or other entity. MDCO has full power and authority to enter into this
Agreement and to carry out its terms. MDCO has taken all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement. This Agreement has been duly and validly executed and delivered by
MDCO and Shareholder and is binding upon and enforceable against MDCO and
Shareholder in accordance with its terms, except as enforceability may be
limited or affected by applicable bankruptcy, insolvency, reorganization or
other laws of general application relating to or affecting the rights of
creditors and except as enforceability may be limited by rules of law governing
specific performance, injunctive relief or other equitable remedies.
3.02 No Adverse Consequences. Neither the execution and delivery of this
Agreement by MDCO or Shareholder nor the consummation of the transactions
contemplated by this Agreement will
3.02-1 result in the creation or imposition of any lien, charge or
encumbrance on any of MDCO's assets or properties,
3.02-2 violate or conflict with any provision of MDCO's articles of
incorporation or bylaws;
3.02-3 violate any law, judgment, order, injunction, decree, rule,
regulation or ruling of any governmental authority applicable to MDCO or
Shareholder; or
3.02-4 either alone or with the giving of notice or the passage of
time or both, conflict with, constitute grounds for termination or acceleration
of, result in the breach of the terms, conditions or provisions of, result in
the loss of any benefit to MDCO under or constitute a default under any
agreement, instrument, license or permit to which MDCO or Shareholder is a party
or by which either of them is bound.
3.03 Brokers and Finders. Neither MDCO nor Shareholder has employed any
broker, finder or agent or dealt with anyone purporting to act in such capacity
or agreed to pay any brokerage fee, finder's fee or commission with respect to
the transaction contemplated by this Agreement, except that MDCO has employed
Torwest Capital. Any fees owing to Torwest Capital are payable and will be paid
by Shareholder and are not a liability of MDCO or GDSC.
3.04 Litigation. Except as set forth on Schedule 3.04, there is no claim,
litigation, proceeding or investigation of any kind pending or threatened by or
against MDCO and, to the best knowledge of MDCO and Shareholder, there is no
basis for any such claim, litigation, proceeding or investigation.
3.05 Compliance with Laws. MDCO has at all relevant times conducted its
business in compliance with its articles of incorporation and bylaws and all
applicable laws and regulations. MDCO is not in violation of any applicable laws
or regulations, other than violations which singly
4
or in the aggregate do not, and, with the passage of time will not, have a
Material Adverse Effect. MDCO is not subject to any outstanding order, writ,
injunction or decree, and MDCO has not been charged with, or threatened with a
charge of, a violation of any provision of federal, state or local law or
regulation.
3.06 Employment Matters.
3.06-1 Labor Matters
(a) MDCO is not a party or otherwise subject to any collective
bargaining or other agreement governing the wages, hours or terms of employment
of his employees. MDCO is and has been in compliance with all applicable laws
regarding employment and employment practices, terms and conditions of
employment, wages and hours and is not and has not been engaged in any unfair
labor practice.
(b) There is no (1) unfair labor practice complaint against MDCO
pending before the National Labor Relations Board or any other governmental
authority, (2) labor strike, slowdown or work stoppage actually occurring or, to
the best of the knowledge of MDCO, threatened against him, (3) representation
petition respecting MDCO's employees pending before the National Labor Relations
Board, or (4) grievance or any arbitration proceeding pending arising out of or
under collective bargaining agreements applicable to MDCO.
(c) MDCO has not experienced any primary work stoppage or other
organized work stoppage involving its employees in the past two years.
3.06-2 Employee Benefits. Schedule 3.06-2 lists all pension,
retirement, profit sharing, deferred compensation, bonus, commission, incentive,
life insurance, health and disability insurance, hospitalization and all other
employee benefit plans or arrangements (including, without limitation, any
contracts or agreements with trustees, insurance companies or others relating to
any such employee benefit plans or arrangements) established or maintained by
MDCO, and complete and accurate copies of all those plans or arrangements have
been provided to GDSC. The employee pension benefit plans (within the meaning of
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") established and maintained by MDCO that are subject to ERISA are
listed separately as ERISA Plans on Schedule 3.06-2 (the "ERISA Plans"). The
ERISA Plans comply with the applicable requirements of ERISA. MDCO has received
from the Internal Revenue Service a favorable determination for each of the
ERISA Plans and their related trusts that each of the ERISA Plans is qualified
under Section 401(a) of the Code and the related trust is tax-exempt under
Section 501(a) of the Code. There has been no event subsequent to that
determination that has adversely affected the tax qualified status of the ERISA
Plans or the exemption of the related trusts other than changes in the Code that
are not effective as of the Closing Date. No "accumulated funding deficiency" as
defined in Section 302(a)(2) of ERISA or Section 412(a) of the Code exists, or
has existed, with respect to any of the ERISA Plans. The present value of all
accrued benefits under each of the ERISA Plans does not exceed the value of such
plan's assets, less all liabilities other than those attributable to accrued
benefits. MDCO has no "potential withdrawal liability," as defined in Section
4201 of ERISA. None of the ERISA Plans, its related trusts or any trustee,
investment manager or administrator thereof has engaged in a nonexempt
"prohibited
5
transaction," as such term is defined in Section 406 of ERISA and Section 4975
of the Code. There are not and have not been any excess deferrals or excess
contributions under any ERISA Plan. Each ERISA Plan is and has been operated and
administered in conformance with the requirements of all applicable laws and
regulations, whether or not the ERISA Plan documents have been amended to
reflect such requirements. MDCO has no obligation of any kind (whether under the
terms of the ERISA Plans or under any understanding with employees) to make
payments under, or to pay contributions to or in respect of, any plan or
arrangement listed on Schedule 3.06-2, or any other plan, agreement or other
arrangement for deferred compensation of employees, whether or not tax
qualified, including, without limitation, a single employer tax qualified plan,
a tax qualified plan of a controlled group of corporations, a multi-employer
pension plan, a nonqualified deferred compensation plan, an individual
employment or compensation agreement or a commitment to provide medical benefits
to retirees.
3.06-3 Employment Agreements. Each of MDCO's employees is an "at-will"
employee and there are no written employment, commission or compensation
agreements of any kind between MDCO and any of MDCO's employees. Schedule 3.06-3
lists all of MDCO's employment or supervisory manuals, employment or supervisory
policies, and written information generally provided to employees (such as
applications or notices), and true and complete copies of those manuals,
policies and written information have been provided to GDSC. MDCO does not have
any agreements or understandings with MDCO's employees except as reflected in
the items listed in Schedules 3.06-2 and 3.06-3.
3.06-4 Compensation. Schedule 3.06-4 contains a complete and accurate
list of all employees or independent contractors of MDCO as of February 28,
1998, specifying their names, annual base compensation of each such person, and
accrued benefits for such persons as of February 28, 1998.
3.07 Financial Statements.
3.07-1 Schedule 3.07 contains the balance sheets of MDCO as of
December 31, 1997 (the "Current Balance Sheet") and December 31, 1996 and the
related statements of income for the years then ended (such balance sheets and
statements collectively, the "Financial Statements").
3.07-2 The Financial Statements present fairly
(a) the financial position of MDCO as of the dates indicated and
(b) the results of operations for the periods then ended.
3.08 Receivables. Schedule 3.08 lists all accounts receivable of MDCO as of
December 31, 1997. Each of the receivables listed on Schedule 3.08, and each of
the receivables that has arisen since December 31, 1997, has arisen only from
bona fide transactions in the ordinary course of business and is not subject to
any offset or counterclaim.
3.09 Prepaid Expenses and Other. Schedule 3.09 lists all prepaid expenses
and deferred charges of MDCO as of December 31, 1997.
6
3.10 Personal Property. Schedule 3.10 contains a complete and accurate list
of all the tangible personal property owned or leased by MDCO ("Tangible
Personal Property"). With respect to each item of owned Tangible Personal
Property, Schedule 3.10 lists the original cost as of December 31, 1997.
3.11 Payables. Schedule 3.11 lists all accounts payable and other accrued
liabilities of MDCO as of December 31, 1997, other than payables for brokers'
and attorneys' fees and other expenses of this transaction, and accrued
liabilities for taxes based on income or revenues of MDCO.
3.12 Indebtedness. Schedule 3.12 lists all indebtedness of MDCO as of
December 31, 1997 incurred in connection with the business, operations or assets
of MDCO or the repayment of which is secured by the assets of MDCO.
3.13 Other Liabilities. Except as listed on Schedule 3.13, MDCO does not
have any liability or obligation (whether absolute, accrued, contingent or
other, and whether due or to become due), other than liabilities incurred in the
ordinary course of business consistent with past practice, which individually or
in the aggregate are not material to the business of MDCO.
3.14 Absence of Certain Changes or Events. Since December 31, 1997, there
has not been:
3.14-1 Any Material Adverse Change or any event, occurrence,
development or state of circumstances or facts which could reasonably be
expected to result in a Material Adverse Change;
3.14-2 Any damage, destruction or casualty loss, whether insured
against or not, to any assets or properties of MDCO;
3.14-3 Any increase in the rate or terms of compensation payable or to
become payable by MDCO to its key employees; any increase in the rate or terms
of any bonus, insurance, pension or other employee benefit plan, payment or
arrangement made to, for or with any such key employees; any special bonus or
remuneration paid; or any written employment contract executed or amended;
3.14-4 Any entry into any agreement, commitment or transaction
(including, without limitation, any borrowing, capital expenditure or capital
financing or any amendment, modification or termination of any existing
agreement, commitment or transaction) by MDCO, except agreements, commitments or
transactions in the ordinary course of business and consistent with past
practices or as expressly contemplated in this Agreement;
3.14-5 Any conduct of business which is outside the ordinary course of
business or not substantially in the manner that MDCO previously conducted its
business;
3.14-6 Any purchase or other acquisition of property, any sale, lease
or other disposition of property, or any expenditure, except in the ordinary
course of business;
7
3.14-7 Any incurrence of any noncontract liability which, either
singly or in the aggregate is material to the business, results of operations,
financial condition or prospects of MDCO;
3.14-8 Any encumbrance or consent to encumbrance of any property or
assets of MDCO except in the ordinary course of business;
3.14-9 Any declaration or payment of any dividend or other
distribution of money or property on or with respect to any shares of MDCO's
capital stock; or
3.14-10 Any change in the assets, liabilities, licenses, permits or
franchises of MDCO, or in any agreement to which MDCO is a party or is bound,
which has had or reasonably could be expected to have a Material Adverse Effect.
3.15 Leases. Schedule 3.15 contains a complete and accurate list of all
real property leases under which MDCO is lessee ("Leases"), a description of the
real property covered thereby ("Real Property"), the term of each Lease and the
monthly payments under the Lease. Complete and accurate copies of all Leases
have been delivered to GDSC.
3.16 Certain Contracts and Arrangements. Schedule 3.16, which is organized
by type of agreement, contains a complete and accurate list of all agreements of
the following types ("Contracts") to which MDCO is a party or by which MDCO is
bound:
3.16-1 any mortgage, note or other instrument or agreement relating to
the borrowing of money or the incurrence of indebtedness by MDCO or MDCO's
guaranty of any obligation for the borrowing of money;
3.16-2 contracts, agreements, purchase orders or acknowledgment forms
for the purchase, sale, lease or other disposition of capital assets or more
than $20,000 of other equipment or materials;
3.16-3 contracts or agreements for provision or receipt of dentistry
services;
3.16-4 contracts or agreements for the performance or receipt of other
services, excluding employment contracts; provided, however, that only contracts
exceeding $20,000 in annual billings or payments by MDCO must be listed;
3.16-5 contracts or agreements involving annual billings in excess of
$20,000 for the joint performance of work or services and all other joint
venture agreements;
3.16-6 contracts or agreements with agents, brokers, consignees, sales
representatives or distributors relating to the sale of MDCO's services; and
3.16-7 any other contract, instrument, agreement or obligation not
described on any other Schedule to which MDCO is a party or by which MDCO is
bound and which contains material unfulfilled obligations of MDCO.
8
Complete and accurate copies of all Contracts have been delivered to GDSC.
3.17 Status of Contracts and Leases.
3.17-1 Each of the Contracts and Leases listed on Schedules 3.15 and
3.16 is valid, binding and enforceable by MDCO in accordance with its terms and
is in full force and effect, except as enforceability may be limited or affected
by applicable bankruptcy, insolvency, reorganization, or other laws of general
application relating to or affecting creditors' rights generally and except as
enforceability may be limited by rules of law governing specific performance,
injunctive relief or other equitable remedies. There is no existing default or
violation by MDCO under any Contract or Lease and no event has occurred which
(whether with or without notice, lapse of time or both) would constitute a
default of MDCO under any Contract or Lease. There is no pending or threatened
proceeding which would interfere with the quiet enjoyment of any Real Property
of which MDCO is lessee or sublessee.
3.17-2 All other parties to the Contracts and Leases have consented or
prior to the Closing will have consented (where such consent is necessary) to
the consummation of the transaction contemplated by this Agreement without
requiring modification of MDCO's rights or obligations under any Contract or
Lease.
3.17-3 MDCO is not aware of any default by any other party to any
Contract or Lease or of any event which (whether with or without notice, lapse
of time or both) would constitute a default by any other party with respect to
obligations of that party under any Contract or Lease, and, to the actual
knowledge of MDCO, there are no facts that exist indicating that any of the
Contracts or Leases may be totally or partially terminated or suspended by the
other parties.
3.17-4 MDCO is not a party to, nor is it bound by, any contract or
agreement that MDCO can reasonably foresee will result in any material loss to
MDCO upon the performance thereof (including any material liability for
penalties or damages, whether liquidated, direct, indirect, incidental or
consequential), unless such contract or agreement is terminable by MDCO on 60 or
fewer days notice at any time without penalty.
3.18 Title and Condition of Tangible Assets.
3.18-1 MDCO owns all of the Tangible Personal Property except the
leased property free and clear of all mortgages, pledges, security interests,
claims, charges or other encumbrances or restrictions of any kind, except
(a) liens disclosed on the Current Balance Sheet or
(b) liens for taxes not yet due or being contested in good faith
(and for which adequate accruals or reserves have been established on the
Current Balance Sheet).
3.18-2 MDCO has good and absolute title to the Tangible Personal
Property except the leased property.
9
3.18-3 All Tangible Personal Property has been maintained and operated
in accordance with manufacturer's specifications and prudent industry practices,
is in a good state of maintenance and repair, ordinary wear and tear excepted,
and is adequate for the conduct of MDCO's business.
3.18-4 There are no developments affecting any of the Real Property or
Tangible Personal Property pending or, to the actual knowledge of MDCO,
threatened which might materially detract from the value of such property or
assets, materially interfere with any present or intended use of any such
property or assets or materially adversely affect the marketability of such
properties or assets.
3.19 Insurance. Schedule 3.19 contains a complete and accurate list of all
policies of malpractice, liability, fire, worker's compensation and other forms
of insurance insuring MDCO and its employees, assets or operations (the
"Policies"). All the Policies are valid, enforceable and in full force and
effect, all premiums with respect to the Policies covering all periods up to and
including the date as of which this representation is being made have been paid
and no notice of cancellation or termination has been received with respect to
any Policy. The Policies are sufficient for compliance with all requirements of
law and of agreements to which MDCO is a party and provide insurance for the
risks and in the amounts and types of coverage usually obtained by persons using
or holding similar properties in similar businesses. There are no unresolved
claims for insurance payment under any of the Policies. True and complete copies
of the Policies and all endorsements thereto have been delivered to GDSC. MDCO
has not been refused any insurance coverage and no insurance coverage has been
cancelled during the five years preceding the date of this Agreement.
3.20 Taxes.
3.20-1 Returns. MDCO has filed all federal, state and other returns,
reports and information returns required to be filed by it with respect to Taxes
which relate to its business, results of operations or financial condition
(collectively, the "Returns") and has timely paid all Taxes shown to be due on
the Returns. All Returns filed are complete and accurate in all material
respects, and no additional Taxes are owed by MDCO with respect to the periods
covered by the Returns. MDCO has provided GDSC with complete and accurate copies
of MDCO's Returns for 1995 and 1996.
3.20-2 Taxes Paid or Reserved. All deficiencies in Taxes asserted or
assessments made by any taxing authority have been fully paid or finally
settled. All Taxes which MDCO has been required to collect or withhold have been
withheld or collected and, to the extent required, have been paid to the proper
taxing authority.
3.20-3 Definition. "Taxes" means all taxes, charges, fees, levies or
other assessments including, without limitation, income, payroll, withholding,
excise, property, sales, use and franchise taxes, imposed by the United States
or any state, county, local or foreign government or subdivision or agency
thereof, and including any interest, penalties or additions.
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3.20-4 S Corporation Status. MDCO is, and at all times since
incorporation has been, an S corporation as defined in Section 1361(a)(1) of the
Code.
3.21 No Restrictions. No contract or agreement to which MDCO is a party or
is bound or to which any of its properties or assets is subject limits the
freedom of MDCO to compete in any line of business or with any person.
3.22 Permits and Licenses. MDCO and Shareholder hold and at all times have
held, all licenses, permits, franchises, easements and authorizations
(collectively, "Permits") necessary for the lawful conduct of its business
pursuant to all applicable statutes, laws, ordinances, rules and regulations of
all governmental bodies, agencies and other authorities having jurisdiction over
it or any part of its operations, except where the failure to hold any Permit,
singly or in the aggregate, either alone or with the giving of notice or the
passage of time or both, would not have a Material Adverse Effect. MDCO and
Shareholder are in compliance with all the terms of each Permit, and there are
no claims of violation by MDCO or Shareholder of any Permit.
3.23 Certain Payments. Neither MDCO nor any other person or entity has,
directly or indirectly, on behalf of or with respect to MDCO or its operations
made or received any payment that was not legal to make or receive under
federal, state or local laws of the United States or any other country or
territory.
3.24 Environmental Conditions.
3.24-1 Compliance. MDCO has operated its business and maintained its
assets, including without limitation the Real Property, in compliance with all
Environmental Laws. All wastes generated in connection with MDCO's business are
and have been transported and disposed of off site in compliance with all
Environmental Laws. No Hazardous Substance is or has been generated,
manufactured, treated, stored, transported, used or otherwise handled on the
Real Property or in connection with MDCO's business.
3.24-2 Definitions. As used in this Agreement,
(a) "Environmental Law" means any federal, state or local
statute, ordinance or regulation pertaining to the protection of human health or
the environment and any applicable orders, judgments, decrees, permits, licenses
or other authorizations or mandates under such statutes, ordinances or
regulations, and
(b) "Hazardous Substance" means any hazardous, toxic, radioactive
or infectious substance, material or waste as defined, listed or regulated under
any Environmental Law, and includes without limitation petroleum oil and its
fractions.
3.25 Consents and Approvals. Except as set forth on Schedule 3.25, no
consent, approval or authorization of any court, regulatory authority,
governmental body, or any other entity or person not a party to this Agreement
is required for the consummation of the transactions described in this Agreement
by MDCO or Shareholder. MDCO and Shareholder have obtained, or shall have
obtained prior to the Closing, all consents, authorizations or approvals of any
third parties
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required in connection with the execution, delivery or performance of this
Agreement by MDCO or Shareholder or the consummation of the transaction
contemplated by this Agreement. MDCO has made all registrations or filings with
any governmental authority required for the execution or delivery of this
Agreement or the consummation of the transaction contemplated hereby.
3.26 Records. The books of account of MDCO are complete and accurate in all
material respects, and there have been no transactions involving the business of
MDCO which properly should have been set forth therein and which have not been
accurately so set forth. Complete and accurate copies of such books have been
made available to GDSC.
3.27 Reliance. MDCO and Shareholder recognize and agree that,
notwithstanding any investigation by GDSC, GDSC is relying upon the
representations and warranties made by MDCO and Shareholder in this Agreement.
3.28 Accuracy of Representations and Warranties. None of the
representations or warranties of MDCO and Shareholder contains or will contain
any untrue statement of any material fact or omits or misstates a material fact
necessary to make the statements contained in this Agreement not misleading.
MDCO and Shareholder do not know of any fact that has resulted or that, in the
reasonable judgment of MDCO or Shareholder will result, in any material change
in MDCO's business, results of operation, financial condition or prospects that
has not been set forth in this Agreement.
ARTICLE IV
Covenants of MDCO and Shareholder
4.01 Access to Properties, Books and Records. Prior to the Closing Date,
MDCO shall, at GDSC's request, afford or cause to be afforded to the agents,
attorneys, accountants and other authorized representatives of GDSC reasonable
access during normal business hours to all employees, properties, books and
records of MDCO and shall permit such persons, at GDSC's expense, to make copies
of such books and records. MDCO shall deliver to GDSC its monthly financial
statements promptly after they become available. GDSC shall treat, and shall
cause all of its agents, attorneys, accountants and other authorized
representatives to treat, all information obtained pursuant to this Section 4.01
as confidential in accordance with Section 10.01 hereof. No investigation by
GDSC or any of its authorized representatives pursuant to this Section 4.01
shall affect any representation, warranty or closing condition of any party
hereto or GDSC's rights to indemnification pursuant to Section 9.02 hereof.
4.02 Negative Covenants. Except as otherwise permitted by this Agreement or
with the prior written consent of GDSC, prior to the Closing Date, MDCO shall
not:
4.02-1 Incur additional debt for borrowed money (including without
limitation obligations under leases for real or personal property whether or not
required to be capitalized under generally accepted accounting principles),
incur or increase any obligation or liability (fixed, contingent or other,
including without limitation liabilities as a guarantor or otherwise with
respect
12
to obligations of others) except in the ordinary and usual course of business
and consistent with past practices, forgive or release any debt or claim, give
any waiver of any right of material value or voluntarily suffer any
extraordinary loss;
4.02-2 Declare, pay or make any dividend or other distribution of
money or property on or with respect to any share of its capital stock, except
that (a) MDCO may distribute to Shareholder cash in an amount that equals the
excess of MDCO's unrestricted cash as of the date of this Agreement over $25,000
and (b) MDCO may distribute to Shareholder to cover income taxes 47% of MDCO's
taxable income less any tax credits available to MDCO for the period from the
date of this Agreement to the Closing Date;
4.02-3 Issue, sell, or give any option or right to purchase any shares
of its capital stock or other securities, or purchase, redeem or otherwise
acquire or commit to acquire, directly or indirectly, any shares of its capital
stock.
4.02-4 Mortgage, pledge, otherwise encumber or subject to lien any of
its assets or properties, tangible or intangible, or commit itself to do any of
the foregoing;
4.02-5 Except in the ordinary and usual course of its business and in
each case for fair consideration, dispose of, or agree to dispose of, any of its
assets or lease or license to others, or agree so to lease or license, any of
its assets;
4.02-6 Acquire any assets which would be material to its business
other than assets acquired in the ordinary and usual course of business and
consistent with past practices;
4.02-7 Purchase or otherwise acquire, or agree to purchase or
otherwise acquire, any debt or equity securities of any corporation,
partnership, joint venture, firm or other entity other than equity securities
issued by a money market fund registered as an investment company under the
Investment Company Act of 1940;
4.02-8 Enter into any transaction or contract or make any commitment
to do the same, except in the ordinary and usual course of business and not
requiring the payment in any case of an amount in excess of $50,000 annually,
and except for any renewal of MDCO's contract with the Oregon Health Plan and
for a subcontract with GMB, Inc. in a form approved by GDSC;
4.02-9 Increase the wages, salaries, compensation, pension or other
benefits payable, or to become payable by it, to any of its employees or agents,
including without limitation any bonus payments or severance or termination pay,
other than increases in wages and salaries required by employment arrangements
existing on the date hereof or otherwise in the ordinary and usual course of its
business;
4.02-10 Implement or agree to any implementation of or amendment or
supplement to any employee profit sharing, pension, bonus, commission,
incentive, retirement, medical reimbursement, life insurance, deferred
compensation or any other employee benefit plan or arrangement;
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4.02-11 Change its accounting methods, policies or practices; or
4.02-12 Agree or commit to do any of the foregoing.
4.03 Affirmative Covenants. Except as otherwise permitted by this Agreement
or with the prior written consent of GDSC, prior to the Closing Date, MDCO
shall:
4.03-1 Operate its business as presently operated and only in the
ordinary course and consistent with past practices;
4.03-2 Advise GDSC in writing of any litigation or administrative
proceeding that challenges or otherwise materially affects the transactions
contemplated hereby and of any Material Adverse Change or any event, occurrence
or circumstance which is likely to cause a Material Adverse Change;
4.03-3 When the consent of any third party to the transactions
contemplated by this Agreement is required under the terms of any contract or
agreement material to MDCO's business to which MDCO is a party or by which MDCO
is bound, use its best efforts to obtain such consent on terms and conditions
not materially less favorable than those in effect on the date hereof;
4.03-4 Use its best efforts to maintain all of the Tangible Personal
Property in good operating condition, reasonable wear and tear excepted,
consistent with past practices, and take all steps reasonably necessary to
maintain its intangible assets;
4.03-5 Not cancel or change any policy of insurance (including
self-insurance) or fidelity bond or any policy or bond providing substantially
the same coverage;
4.03-6 Maintain, consistent with past practices, all inventories,
spare parts, office supplies and other expendable items;
4.03-7 Use its best efforts to retain all key employees;
4.03-8 Maintain its books and records in accordance with past
practices;
4.03-9 Pay and discharge all taxes, assessments, governmental charges
and levies imposed upon it, its income or profits or upon any property belonging
to it, in all cases prior to the date on which penalties attach thereto;
4.03-10 Pay and discharge in full all indebtedness listed on Schedule
3.12 and all obligations under any capital leases; and
4.03-11 Comply with all laws, rules and regulations applicable to it
and its business.
4.04 No Negotiations With Others. Except as otherwise permitted by this
Agreement or with the prior written consent of GDSC, MDCO and Shareholder shall
refrain, and shall cause MDCO's employees and any investment banker, attorney,
accountant or other agent retained by
14
either of them to refrain, from initiating or soliciting any inquiries or making
any proposals with respect to, or engaging in negotiations concerning, or
providing any confidential information or data to or having any discussions with
any person relating to, any acquisition, business combination or purchase of all
or any significant portion of the assets of, or any equity interest in, MDCO.
MDCO
and Shareholder will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing.
ARTICLE V
Joint Covenants
GDSC, MDCO and Shareholder covenant and agree that they will act in
accordance with the following:
5.01 Governmental Consents. Promptly following the execution of this
Agreement, the parties will proceed to prepare and file with the appropriate
governmental authorities any requests for approval or waiver, if any, that are
required from governmental authorities in connection with the transactions
contemplated hereby, and the parties shall diligently and expeditiously
prosecute and cooperate fully in the prosecution of such requests for approval
or waiver and all proceedings necessary to secure such approvals and waivers.
5.02 Best Efforts; No Inconsistent Action. Each party will use its best
efforts to effect the transactions contemplated by this Agreement and to fulfill
the conditions to the obligations of the other parties set forth in Article 6 or
7 of this Agreement. No party will take any action inconsistent with its
obligations under this Agreement or that could hinder or delay the consummation
of the transactions contemplated by this Agreement, except that nothing in this
Section 5.02 shall limit the rights of the parties under Articles 6, 7 and 8.
ARTICLE VI
Conditions to Obligations of GDSC
The obligations of GDSC under Article 1 are, at its option, subject to
satisfaction, at or prior to the Closing, of each of the following conditions:
6.01 Governmental Approvals. All authorizations, consents and approvals of
all governmental agencies and authorities required to be obtained in order to
permit consummation of the transactions contemplated by this Agreement shall
have been obtained and be satisfactory in form and content to GDSC.
6.02 Consents. MDCO shall have obtained the third-party consents required
under the terms of the Contracts and Leases, and such consents shall not have
required any change to the terms and conditions of the Contracts and Leases
other than changes consented to in writing by GDSC.
15
6.03 Representations, Warranties and Covenants.
6.03-1 All representations and warranties of MDCO and Shareholder made
in this Agreement, or in any certificate delivered pursuant hereto, shall in all
material respects be true and complete on and as of the Closing Date with the
same force and effect as if made on and as of that date.
6.03-2 All of the terms, covenants and conditions to be complied with
and performed by MDCO and Shareholder at or prior to the Closing shall in all
material respects have been complied with or performed thereby.
6.03-3 GDSC shall have received a certificate of Shareholder, dated as
of the Closing Date, to the effect that the representations and warranties of
MDCO and Shareholder contained in this Agreement are in all material respects
true and complete on and as of the Closing Date as though made on and as of the
Closing Date and that MDCO and Shareholder have in all material respects
complied with or performed all terms, covenants and conditions to be complied
with or performed by it or him at or prior to the Closing.
6.04 Adverse Proceedings. No suit, action, claim or governmental proceeding
shall have been instituted or threatened against, and no order, decree or
judgment of any court, agency or other governmental authority shall have been
rendered against, GDSC, MDCO or Shareholder to restrain or prohibit, or obtain
damages in respect of, this Agreement or the transactions contemplated by this
Agreement.
6.05 No Adverse Change. There shall not have been any Material Adverse
Change.
6.06 Opinion of Counsel. GDSC shall have received an opinion of Tonkon Torp
LLP, counsel to MDCO and Shareholder, dated the Closing Date, in substantially
the form attached hereto as Exhibit A.
6.07 ADC Agreement Closing. The closing of the ADC Agreement shall have
occurred.
6.08 Lease. Shareholder shall have executed and delivered a lease of the
balance of Shareholder's Newberg property in substantially the form attached as
Exhibit G-2 to the ADC Agreement.
6.09 Actions Satisfactory to GDSC's Counsel. All actions, proceedings,
instruments and documents required to be carried out by this Agreement, or
incidental hereto, and all other relevant legal matters shall be reasonably
satisfactory to counsel for GDSC.
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ARTICLE VII
Conditions to Obligations of Shareholder
The obligations of Shareholder under Article 1 are, at his option, subject
to satisfaction, at or prior to the Closing, of each of the following
conditions:
7.01 Representations, Warranties and Covenants.
7.01-1 All representations and warranties of GDSC made in this
Agreement and in any certificate delivered pursuant hereto shall in all material
respects be true and complete on and as of the Closing Date with the same force
and effect as if made on and as of that date.
7.01-2 All of the terms, covenants and conditions to be complied with
and performed by GDSC on or prior to the Closing shall in all material respects
have been complied with or performed by GDSC.
7.01-3 Shareholder shall have received a Certificate of GDSC, dated as
of the Closing Date, executed by the President or other authorized officer of
GDSC, to the effect that the representations and warranties of GDSC contained in
this Agreement are in all material respects true and complete on and as of the
Closing Date as though made on and as of the Closing Date and that GDSC has in
all material respects complied with or performed all terms, covenants and
conditions to be complied with or performed by it at or prior to the Closing.
7.02 Adverse Proceedings. No suit, action, claim or governmental proceeding
shall have been instituted or threatened against, and no order, decree or
judgment of any court, agency or other governmental authority shall have been
rendered against, GDSC, MDCO or Shareholder to restrain or prohibit this
Agreement or the transactions contemplated by this Agreement.
7.03 Opinion of Counsel. Shareholder shall have received an opinion of
Stoel Rives LLP, counsel to GDSC, dated the Closing Date, in substantially the
form attached hereto as Exhibit B.
7.04 ADC Agreement Closing. The closing of the ADC Agreement shall have
occurred.
7.05 Lease. GDSC shall have executed and delivered a lease of the balance
of Shareholder's Newberg property in substantially the form attached as Exhibit
G-2 to the ADC Agreement.
7.06 Actions Satisfactory to MDCO's Counsel. All actions, proceedings,
instruments and documents required to be carried out by this Agreement, or
incidental hereto, and all other relevant legal matters shall be reasonably
satisfactory to counsel for MDCO.
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ARTICLE VIII
Termination
8.01 Right of Parties to Terminate. This Agreement may be terminated:
8.01-1 by GDSC, if any of the authorizations, consents, approvals,
filings or registrations described in Section 6.01 hereof shall have been
denied, not permitted to go into effect or obtained on terms not reasonably
satisfactory to GDSC and all reasonable final appeals shall have been exhausted;
8.01-2 by GDSC, if MDCO or Shareholder shall have breached any of
their obligations hereunder in any material respect;
8.01-3 by MDCO, if GDSC shall have breached any of its obligations
hereunder in any material respect; or
8.01-4 by either MDCO or GDSC, by written notice to the other party,
if the Closing shall not have occurred on or prior to December 31, 1999;
provided, however, that the right to terminate this Agreement under this Section
8.01-4 shall not be available to any party whose failure to fulfill or perform
any obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date.
8.02 Effect of Termination. If either GDSC or MDCO decides to terminate
this Agreement pursuant to Section 8.01, such party shall promptly give written
notice to the other party to this Agreement of such decision. In the event of a
termination pursuant to Section 8.01, the parties hereto shall be released from
all liabilities and obligations arising under this Agreement (other than those
described in Article 10 hereof) with respect to the matters contemplated by this
Agreement, other than for damages arising from a breach of this Agreement.
ARTICLE IX
Survival; Indemnification
9.01 Survival. All representations, warranties, covenants and agreements
made in this Agreement or in any schedule, certificate or assignment delivered
in accordance with this Agreement (collectively, the "Related Documents") shall
survive any investigation by or on behalf of any party, the execution and
delivery of this Agreement, the consummation of the transactions contemplated
hereby and any termination or expiration of this Agreement for a period of three
years and two months following the Closing Date and after such period shall be
terminated and extinguished, except insofar as the damaged party shall have
asserted in writing a claim setting forth with reasonable specificity facts and
circumstances relating thereto prior to the expiration of such period in which
event the party liable shall remain liable with respect to such claim.
18
9.02 Indemnification by Shareholder.
9.02-1 Notwithstanding any investigation by GDSC, from and after the
Closing, Shareholder shall indemnify, hold harmless and, to the extent provided
in Section 9.04-1, defend GDSC, its subsidiaries, shareholders, affiliates,
officers, directors, employees, agents, successors and assigns (collectively,
including GDSC, "GDSC's Indemnified Persons") from and against, and reimburse
each of GDSC's Indemnified Persons with respect to, any and all losses, damages,
liabilities, costs and expenses, including interest from the date of such loss
to the time of payment, penalties and reasonable attorneys' fees (collectively,
"Damages") incurred by any of GDSC's Indemnified Persons by reason of or arising
out of or in connection with:
(a) any breach or inaccuracy of any representation or warranty of
MDCO or Shareholder made in this Agreement or any Related Document; or
(b) any failure by MDCO or Shareholder to perform any covenant
required to be performed by them pursuant to this Agreement or any Related
Document.
9.02-2 This indemnification extends to any Damages suffered by any of
GDSC's Indemnified Persons, whether or not a claim is made against any of GDSC's
Indemnified Persons by any third party.
9.03 Indemnification by GDSC.
9.03-1 Notwithstanding any investigation by Shareholder, from and
after the Closing, GDSC shall indemnify, hold harmless and, to the extent
provided in Section 9.04-1, defend Shareholder from and against, and reimburse
Shareholder with respect to, any and all Damages incurred by Shareholder by
reason of or arising out of or in connection with:
(a) any breach or inaccuracy of any representation or warranty of
GDSC made in this Agreement or any Related Document; or
(b) any failure by GDSC to perform any covenant required to be
performed by it pursuant to this Agreement or any Related Document.
9.03-2 This indemnification extends to any Damages suffered by
Shareholder whether or not a claim is made against Shareholder by any third
party.
9.04 Indemnification Procedure.
9.04-1 Third Party Claims.
(a) Each indemnified party shall, with reasonable promptness
after obtaining knowledge thereof, provide any indemnifying party against whom a
claim for indemnification is to be made under this Article 9 with written notice
of all third party actions, suits, proceedings, claims, demands or assessments
that may be subject to the indemnification provisions
19
of this Article 9 (collectively, "Third Party Claims"), including, in reasonable
detail, the basis for the claim, the nature of Damages and a good faith estimate
of the amount of Damages.
(b) Each indemnifying party shall have 15 days after its receipt
of the claim notice to notify the indemnified party in writing whether the
indemnifying party agrees that the claim is subject to this Article 9 and, if
so, whether the indemnifying party elects, jointly with any other indemnifying
party notified under Section 9.04-1(a), to undertake, conduct and control,
through counsel of its or their choosing (subject to the consent of the
indemnified party, such consent not to be withheld unreasonably) and at its or
their sole risk and expense, the good faith settlement or defense of the Third
Party Claim.
(c) If within 15 days after its receipt of the claim notice an
indemnifying party notifies the indemnified party that it elects to undertake
the good faith settlement or defense of the Third Party Claim, the indemnified
party shall cooperate reasonably with the indemnifying party in connection
therewith including, without limitation, by making available to the indemnifying
party all relevant information material to the defense of the Third Party Claim.
The indemnified party shall be entitled to participate in the settlement or
defense of the Third Party Claim through counsel chosen by the indemnified
party, at its expense, and to approve any proposed settlement that would impose
any obligation or duty on the indemnified party, which approval may, in the sole
discretion of the indemnified party, be withheld. So long as an indemnifying
party is contesting the Third Party Claim in good faith and with reasonable
diligence, the indemnified party shall not pay or settle the Third Party Claim.
Notwithstanding the foregoing, the indemnified party shall have the right to pay
or settle any Third Party Claim at any time, provided that in such event it
waives any right to indemnification therefor by the indemnifying party.
(d) If an indemnifying party does not provide notice that it
elects to undertake the good faith settlement or defense of the Third Party
Claim, or if an indemnifying party fails to contest the Third Party Claim or
undertake or approve settlement, in good faith and with reasonable diligence,
the indemnified party shall thereafter have the right to contest, settle or
compromise the Third Party Claim in good faith at its exclusive discretion, at
the risk and expense of the indemnifying party, and the indemnifying party will
thereby waive any claim, defense or argument that the indemnified party's
settlement or defense of such Third Party Claim is in any respect inadequate or
unreasonable.
(e) A party's failure to give timely notice will not constitute a
defense, in part or in whole, to any claim for indemnification by such party,
except if, and only to the extent that, such failure results in any material
prejudice to the indemnifying party.
9.04-2 Non-Third Party Claims.
(a) Each indemnified party shall, with reasonable promptness,
deliver to any indemnifying party against whom a claim for indemnification is to
be made under this Article 9 written notice of all claims for indemnification
under this Article 9, other than Third Party Claims, including, in reasonable
detail, the basis for the claim, the nature of Damages and a good faith estimate
of the amount of Damages.
20
(b) Each indemnifying party shall have 30 days after its receipt
of the claim notice to notify the indemnified party in writing whether the
indemnifying party accepts liability for all or any part of the Damages
described in the claim notice. If the indemnifying party does not so notify the
indemnified party, the indemnifying party shall be deemed to accept liability
for all the Damages described in the claim notice.
(c) A party's failure to give timely notice will not constitute a
defense, in part or in whole, to any claim for indemnification by such party,
except if, and only to the extent that, such failure results in any material
prejudice to the indemnifying party.
9.05 Right of Offset. At the election of GDSC, any liability of Shareholder
under Section 9.02 which has been established by agreement, litigation or in
accordance with the procedure set forth in Section 9.04 may be satisfied by
offsetting such liability against any Earnout Payment (as defined in the ADC
Agreement) payable under the ADC Agreement that is then due or that subsequently
becomes due; provided, however, that if Shareholder gives notice to GDSC within
30 days after Shareholder receives a notice of claim under Section 9.04-1(a) or
9.04-2(a) of this Agreement that Shareholder contests its liability for such
claim, GDSC may not exercise its right of offset until the procedure described
in Section 9.06 of the ADC Agreement has been completed.
9.06 Limitations. Anything to the contrary notwithstanding, an indemnified
party shall not be indemnified and held harmless in respect of any Damages which
are covered by insurance owned by the indemnified party to the extent that any
loss is reduced by such insurance. The right of the GDSC Indemnified Persons to
seek indemnification from ADC and/or Shareholder under this Agreement or the ADC
Agreement shall terminate the sooner of (a) 38 months from Closing or (b) at
such time as the total Damages paid by ADC and/or Shareholder (whether or not
paid by offset of amounts owed to ADC or Shareholder) reach a total of
$3,500,000.00.
9.07 Rights Not Exclusive. An indemnified party's rights to indemnification
under this Article 9 shall be the exclusive remedy for recovery of monetary
damages in the event of any breach of any representation, warranty or covenant
under this Agreement, but such rights are in addition to, and not in lieu of,
any other rights to which the indemnified party may be entitled in equity.
ARTICLE X
Confidentiality; Press Releases
10.01 Confidentiality.
10.01-1 No information concerning MDCO not previously disclosed to the
public or in the public domain that has been furnished to or obtained by GDSC
under this Agreement or in connection with the transactions contemplated hereby
shall be disclosed to any person other than in confidence to employees, legal
counsel, financial advisers or independent public accountants of GDSC or used
for any purpose other than as contemplated herein. If the transactions
contemplated by this Agreement are not consummated, GDSC shall hold such
information in confidence for a period of two years from the date of any
termination of this Agreement, and all such information that
21
is in writing or embodied on a diskette, tape or other tangible medium shall be
promptly returned to MDCO.
10.01-2 No information concerning GDSC not previously disclosed to the
public or in the public domain that has been furnished to or obtained by MDCO or
Shareholder under this Agreement or in connection with the transactions
contemplated hereby shall be disclosed to any person other than in confidence to
the employees, legal counsel, financial advisers or independent public
accountants of MDCO or used for any purpose other than as contemplated herein.
If the transactions contemplated by this Agreement are not consummated, MDCO and
Shareholder shall hold such information in confidence for a period of three
years from the date of any termination of this Agreement, and all such
information that is in writing or embodied on a diskette, tape or other tangible
medium shall be promptly returned to GDSC.
10.01-3 Notwithstanding the foregoing, such obligations of GDSC and of
MDCO shall not apply to information
(a) that is, or becomes, publicly available from a source other
than GDSC or MDCO, as the case may be;
(b) that was known and can be shown to have been known by GDSC at
the time of its receipt from MDCO, or by MDCO at the time of its receipt from
GDSC, as the case may be;
(c) that is received by GDSC from a third party without breach of
this Agreement by GDSC, or is received by MDCO from a third party without breach
of this Agreement by MDCO, as the case may be;
(d) that is required by law to be disclosed; or
(e) that is disclosed in accordance with the written consent of
GDSC or of MDCO, as the case may be.
10.02 Press Releases. No press releases or other public announcements
concerning the transactions contemplated by this Agreement shall be made by MDCO
without the prior written consent of GDSC; provided, however, that nothing
herein shall prevent a party from supplying such information or making
statements as required by governmental authority or in order for a party to
satisfy its legal obligations (prompt notice of which shall in any such case be
given to the other party or parties).
ARTICLE XI
Other Provisions
11.01 Benefit and Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. No party hereto may
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voluntarily or involuntarily assign such party's interest under this Agreement
without the prior written consent of the other parties.
11.02 Entire Agreement. This Agreement and the Schedules and Exhibits
referred to herein embody the entire agreement and understanding of the parties
and supersede any and all prior agreements, arrangements and understandings
relating to matters provided for herein.
11.03 Fees and Expenses. GDSC shall be solely responsible for all costs and
expenses incurred by it, and Shareholder shall be solely responsible for all
costs and expenses incurred by Shareholder or MDCO, in connection with the
negotiation, preparation and performance of and compliance with the terms of
this Agreement.
11.04 Amendment, Waiver, etc. The provisions of this Agreement may be
amended or waived only by an instrument in writing signed by the party against
which enforcement of such amendment or waiver is sought. Any waiver of any term
or condition of this Agreement or any breach hereof shall not operate as a
waiver of any other such term, condition or breach, and no failure to enforce
any provision hereof shall operate as a waiver of such provision or of any other
provision hereof.
11.05 Headings. The headings are for convenience only and will not control
or affect the meaning or construction of the provisions of this Agreement.
11.06 Governing Law. The construction and performance of this Agreement
will be governed by the laws of the State of Oregon (except for the choice of
law provisions thereof).
11.07 Notices. Any notice, demand or request required or permitted to be
given under the provisions of this Agreement shall be in writing; shall be
delivered personally, including by means of telecopy, or mailed by registered or
certified mail, postage prepaid and return receipt requested; shall be deemed
given on the date of personal delivery or on the date set forth on the return
receipt; and shall be delivered or mailed to the addresses or telecopy numbers
set forth on the first page of this Agreement or to such other address as any
party may from time to time direct, with copies to:
In the case of GDSC:
Stoel Rives LLP
900 SW Fifth Avenue, Suite 2300
Portland, OR 97204
Telecopy No.: (503) 220-2480
Attention: Edward L. Epstein
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In the case of MDCO or Shareholder:
Tonkon Torp LLP
1600 Pioneer Tower
888 SW Fifth Avenue
Portland, OR 97204
Telecopy No.: (503) 972-3754
Attention: Brendan R. McDonnell
11.08 Breach; Equitable Relief. The parties acknowledge that the business
of MDCO and rights of the parties described in this Agreement are unique and
that money damages alone for breach of this Agreement would be inadequate. Any
party aggrieved by a breach of the provisions hereof may bring an action at law
or suit in equity to obtain redress, including specific performance, injunctive
relief or any other available equitable remedy. Time and strict performance are
of the essence in this Agreement.
11.09 Attorneys' Fees. If suit or action is filed by any party to enforce
the provisions of this Agreement or otherwise with respect to the subject matter
of this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees as fixed by the trial court and, if any appeal is taken from the
decision of the trial court, reasonable attorneys' fees as fixed by the
appellate court. For purposes of this Agreement, the term "prevailing party"
shall be deemed to include a party that successfully opposes a petition for
review filed with an appellate court.
11.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
GDSC: GENTLE DENTAL SERVICE CORPORATION
By: L. T. VAN EERDEN
-------------------------------------
Title: Executive Vice President
----------------------------------
MDCO: MANAGED DENTAL CARE OF OREGON, INC.
By: GERALD M. BIEZE, DDS
-------------------------------------
Gerald M. Bieze, DDS, President
Shareholder: GERALD M. BIEZE, DDS
-----------------------------------------
Gerald M. Bieze, DDS
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