ASSET PURCHASE AGREEMENT
between
GENTLE DENTAL SERVICE CORPORATION,
GENTLE DENTAL MANAGEMENT, INC.
and
BRYAN WATANABE, D.D.S., INC.
Dated June 30, 1998
TABLE OF CONTENTS
Page
----
ARTICLE I - Purchase and Sale of Asset............................. 2
1.01 Purchase and Sale................................ 2
1.02 Purchase Price................................... 2
1.03 Instruments of Conveyance and Transfer........... 2
1.04 Further Assurances............................... 2
1.05 Closing ........................................ 3
ARTICLE II - Representations and Warranties of GD Sub and GDSC..... 3
2.01 Authorization.................................... 3
2.02 Capitalization................................... 3
2.03 Compliance....................................... 3
2.04 Consents......................................... 4
2.05 Accuracy of Representations & Warranties......... 4
2.06 Rule 144......................................... 4
ARTICLE III - Representations and Warranties of Watanabe PC and
Shareholder.......................................... 4
3.01 Corporate Existence; Authority................... 4
3.02 No Adverse Consequences.......................... 5
3.03 Brokers and Finders.............................. 5
3.04 Investments Representations...................... 5
3.05 Access to Information............................ 6
3.06 Sophistication................................... 6
3.07 Accuracy of Representations and Warranties....... 6
ARTICLE IV - Joint Covenants....................................... 6
4.01 Best Efforts; No Inconsistent Action............. 6
ARTICLE V - Conditions to Obligations of GD Sub.................... 7
5.01 Representations, Warranties and Covenants........ 7
5.02 Adverse Proceedings.............................. 7
5.03 Management Agreement............................. 7
5.04 Shares Acquisition Agreement..................... 7
5.05 Dentist Employment Agreement..................... 7
5.06 Closing of PDS Transaction....................... 7
5.07 Actions Satisfactory to GD Sub's Counsel......... 7
i
ARTICLE VI - Conditions to Obligations of Watanabe PC.............. 8
6.01 Representations, Warranties and Covenants........ 8
6.02 Adverse Proceedings.............................. 8
6.03 Stock Price...................................... 8
ARTICLE VII - Termination.......................................... 8
7.01 Right of Parties to Terminate.................... 8
7.02 Effect of Termination............................ 9
ARTICLE VIII - Survival; Indemnification........................... 9
8.01 Survival......................................... 9
8.02 Indemnification by Watanabe PC and Shareholder... 9
8.03 Indemnification by GD Sub........................ 10
8.04 Indemnification Procedure........................ 10
8.05 Right of Offset.................................. 11
8.06 Rights Not Exclusive............................. 12
ARTICLE IX - Confidentiality; Press Releases....................... 12
9.1 Confidentiality.................................. 12
9.2 Press Releases................................... 13
ARTICLE X - Other Provisions....................................... 13
10.01 Benefit and Assignment........................... 13
10.02 Entire Agreement................................. 13
10.03 Fees and Expenses................................ 13
10.04 Amendment, Waiver, etc........................... 13
10.05 Headings......................................... 13
10.06 Governing Law.................................... 13
10.07 Notices ........................................ 13
10.08 Breach; Equitable Relief......................... 14
10.09 Attorneys' Fees.................................. 14
10.10 Guarantee........................................ 14
10.11 Counterparts..................................... 15
ii
INDEX OF DEFINED TERMS
Term Location of Definition
- ---- ----------------------
1933 Act............................................. 2.06
Asset................................................ 1.01
Cash Consideration................................... 1.02-1
Closing.............................................. 1.05
Closing Date......................................... 1.05
Damages.............................................. 8.02-1
Dental Practice...................................... Introduction
Earnout Consideration................................ 1.02-4
GD Sub............................................... Introduction
GD Sub's Indemnified Persons......................... 8.02-1
GDSC................................................. Introduction
GDSC Common Stock.................................... 1.02-2
PDS.................................................. Introduction
PDS Management Agreement............................. Introduction
Purchase Price....................................... 1.02
Registration Statement............................... 2.02
Related Documents.................................... 8.01
Shares............................................... 2.06
Shareholder.......................................... Introduction
Stock Consideration Amount........................... 1.02-2
Stock Price.......................................... 1.02-2
Third Party Claims................................... 8.04-1(a)
Watanabe PC.......................................... Introduction
Watanabe PC's Indemnified Persons.................... 8.03-1
LIST OF EXHIBITS
Exhibit Item First Reference
- ------- ---- ---------------
A Assignment and Bill of Sale 1.03
B Management Agreement 5.03
C Shares Acquisition Agreement 5.04
D Dentist Employment Agreement 5.05
iii
ASSET PURCHASE AGREEMENT
DATED: June 30, 1998
BETWEEN: GENTLE DENTAL SERVICE CORPORATION,
a Washington corporation
900 Washington Street, Suite 1100
Vancouver, WA 98660
Telecopy No.: (360) 750-8667 "GDSC"
GENTLE DENTAL MANAGEMENT, INC.
a Delaware corporation
900 Washington Street, Suite 1100
Vancouver, WA 98660
Telecopy No.: (360) 750-8667 "GD Sub"
AND: BRYAN WATANABE, D.D.S., INC.
10286 Indiana Ave.
Riverside, CA 92503
Telecopy No.: (714) 646-1659 "Watanabe PC"
AND: Bryan Watanabe "Shareholder"
Shareholder is the owner of all of the issued and outstanding capital stock
of Watanabe PC. Watanabe PC operates a dental practice at the addresses listed
above (the "Dental Practice"). Watanabe PC is party to a management services
agreement (the "PDS Management Agreement") with Pacific Dental Services, Inc.
("PDS"), and Watanabe PC and Shareholder are parties to a merger option
agreement with PDS (the "Merger Option Agreement"). GDSC, GD Sub and PDS are
consurrently signing an agreement (the "PDS Asset Agreement") pursuant to which
PDS will sell certain assets to GD Sub, including all assets of PDS associated
with the Dental Practice which assets include PDS's rights under the PDS
Management Agreement and the Merger Option Agreement. Watanabe PC desires to
sell, and GD Sub desires to purchase, the rights of Watanabe PC under the PDS
Management Agreement on the terms and conditions set forth in this Agreement,
and to replace the PDS Management Agreement with a new management agreement
between GD Sub and Watanabe PC (the "GD Management Agreement").
In consideration of the mutual promises and covenants contained in this
Agreement, the parties agree as follows:
ARTICLE I
Purchase and Sale of Asset
1.01 Purchase and Sale. Subject to all the terms and conditions of this
Agreement and for the consideration herein stated, on the "Closing Date," as
that term is defined in Section 1.05, Watanabe PC agrees to sell, convey,
assign, transfer and deliver to GD Sub, and GD Sub agrees to purchase and accept
from PDS, the rights of Watanabe PC under the PDS Management Agreement (the
"Asset"). Effective as of the Closing Date, the PDS Management Agreement and the
Merger Option Agreement shall be terminated and shall have no further force or
effect.
1.02 Purchase Price. The purchase price for the Asset (the "Purchase
Price") shall be the following:
1.02-1 $240,000, payable by check on the Closing Date (the "Cash
Consideration").
1.02-2 A number of shares of GDSC's Common Stock ("GDSC Common Stock")
determined by dividing $65,000 (the "Stock Consideration Amount") by a number
(the "Stock Price") equal to the average of the closing prices of GDSC Common
Stock reported by NASDAQ for the five trading days prior to the date of this
Agreement. The shares of GDSC Common Stock to be delivered under this Agreement
shall be issued by GDSC to GD Sub for transfer by GD Sub to Watanabe PC.
1.02-3 An amount equal to 25% of the excess of (a) the sum of the Cash
Consideration and the Stock Consideration Amount over (b) $250,000, payable by
check on the Closing Date.
1.02-4 An additional payment (the "Earnout Consideration") equal to
1.25 times the excess of (a) 2.746 times the average monthly revenue of the
Dental Practice for the 6 month period ending February 28, 2000 over (b) the sum
of the Cash Consideration and the Stock Consideration Amount. The Earnout
Consideration shall be paid by check. The calculation and payment of the Earnout
Consideration shall be completed by May 31, 2000.
1.03 Instruments of Conveyance and Transfer. The sale of the Asset, and the
conveyance, assignment, transfer and delivery of all of the Asset shall be
effected by Watanabe PC's execution and delivery to GD Sub, on the Closing Date,
of a bill of sale in substantially the form of the Assignment and Bill of Sale
attached hereto as Exhibit A.
1.04 Further Assurances. Watanabe PC and Shareholder agree that, at any
time and from time to time on and after the Closing Date, they will, upon the
request of GD Sub and without further consideration, take all steps reasonably
necessary to place GD Sub in possession and operating control of the Asset and
will do, execute, acknowledge and deliver, or will cause to be done, executed,
acknowledged and delivered, all further acts, deeds, assignments, conveyances,
transfers, powers of attorney or assurances as reasonably required to sell,
assign, convey, transfer, grant, assure and confirm to GD Sub, or to aid and
assist in the collection of or reducing to possession by GD Sub of, the Asset,
or to vest in GD Sub good, valid and marketable title to the Asset.
2
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, at 10:00 a.m., Pacific time,
on June 30, 1998 or at another date, time and place agreed upon in writing by
the parties (the "Closing Date").
ARTICLE II
Representations and Warranties of GD Sub and GDSC
GD Sub and GDSC, jointly and severally, represent and warrant to Watanabe
PC as follows:
2.01 Authorization. Each of GD Sub and GDSC is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, with all requisite corporate power and authority to own and
operate its properties and to carry on its business as now conducted. Each of GD
Sub and GDSC has taken all corporate action necessary to authorize its
execution, delivery and performance of this Agreement. Each of GD Sub and 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 GD
Sub and GDSC and is binding upon and enforceable against each of them in
accordance with its terms, except as enforceability may be limited or affected
by applicable bankruptcy, insolvency, reorganization, or other laws of general
application relating to or affecting creditors' rights generally and except as
enforceability may be limited by rules of law governing specific performance,
injunctive relief or other equitable remedies.
2.02 Capitalization. The authorized capital stock of GDSC consists of
50,000,000 shares of Common Stock, of which 7,994,213 shares are issued and
outstanding, and 30,000,000 shares of Preferred Stock, of which 1,628,863 shares
are issued and outstanding. All issued and outstanding shares of GDSC capital
stock are validly issued, fully paid and nonassessable, and have been issued
without violation of any preemptive rights. There is no subscription, option,
warrant, call, right, agreement or commitment (including any right of conversion
or exchange under any outstanding security or other instrument) relating to the
issuance by GDSC of GDSC capital stock other than outstanding options under the
GDSC 1993 Stock Incentive Plan, outstanding purchase rights under the GDSC
Employee Stock Purchase Plan and the GDSC Professional Corporation Employee
Stock Purchase Plan, other options and warrants described in GDSC's Registration
Statement on Form SB-2, Registration No. 333-44037 (the "Registration
Statement"), the issuance of convertible debt and preferred stock announced by
GDSC on May 12, 1998, and outstanding offers and/or agreements to acquire other
dental practices or dental practice management companies in exchange for Common
Stock. The GDSC Common Stock to be issued under this Agreement will, when
issued, be duly and validly authorized and issued, fully paid and nonassessable.
2.03 Compliance. The execution, delivery and performance of this Agreement
by GD Sub and GDSC, the compliance by GD Sub and GDSC with the provisions of
this Agreement and the consummation of the transactions described in this
Agreement will not conflict with or result in the breach of any of the terms or
provisions of or constitute a default under:
2.03-1 the respective articles of incorporation or bylaws of GD Sub
and GDSC;
3
2.03-2 any note, indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument to which GD Sub or GDSC is a party or by
which GD Sub or GDSC is bound; or
2.03-3 any statute or any order, rule, regulation or decision of any
court or regulatory authority or governmental body applicable to GD Sub or GDSC.
2.04 Consents. No consent, approval, authorization, order, designation or
declaration of any court or regulatory authority or governmental body, federal
or other, or third person is required to be obtained by GD Sub or GDSC for the
consummation of the transactions described in this Agreement.
2.05 Accuracy of Representations & Warranties. None of the representations
or warranties of GD Sub or 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. Neither GD Sub nor GDSC
knows of any fact that has resulted or that, in the reasonable judgement of GD
Sub or GDSC will result, in any material adverse change in the business, results
of operation, financial condition or prospects of GD Sub or GDSC that has not
been set forth in this Agreement or in GDSC's filings with the Securities and
Exchange Commission.
2.06 Rule 144. With a view to making available to Watanabe PC the benefits
of Rule 144 promulgated under the Securities Act of 1933 (the "1933 Act"), GDSC
agrees, during the one-year period starting on the first anniversary of the
Closing Date or such longer period as the public resale of the shares of GDSC
Common Stock issued under this Agreement ("Shares") by a nonaffiliate of GDSC is
subject to Rule 144, to file with the Securities and Exchange Commission in a
timely manner all reports and other documents required of GDSC under the
Securities Exchange Act of 1934. GDSC agrees to remove the legend described in
the last sentence of Section 3.04 from the certificates representing the Shares,
upon request of the holder, at any time after the second anniversary of the
Closing Date or such other time as the Shares may be freely sold by the holder
without restriction under Rule 144.
ARTICLE III
Representations and Warranties of Watanabe PC and Shareholder
Watanabe PC and Shareholder represent and warrant to GD Sub as follows:
3.01 Corporate Existence; Authority. Watanabe PC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, and Watanabe PC 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 Watanabe PC. Watanabe PC has full power and
authority to enter into this Agreement and to carry out its terms. Upon
execution of this Agreement by all Shareholder,Watanabe PC will have 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 Watanabe PC and Shareholder and is binding upon and enforceable
against
4
Watanabe PC 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 Watanabe PC 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 Watanabe PC's assets or properties,
3.02-2 violate or conflict with any provision of Watanabe PC'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 Watanabe PC,
Shareholder, or either of them, assuming that the agreements to be entered into
between GD Sub and Watanabe PC do not violate applicable laws, 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 Watanabe PC under or constitute a default under any
agreement, instrument, license or permit to which Watanabe PC or Shareholder is
a party or by which either of them is bound, assuming that the agreements to be
entered into between GD Sub and Watanabe PC do not violate applicable laws.
3.03 Brokers and Finders. Neither Watanabe PC 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.
3.04 Investment Representations. Watanabe PC is acquiring the Shares and
Shareholder is acquiring beneficial ownership of the Shares for investment for
its or his own account, and not with a view to, or for resale in connection
with, any distribution of the Shares, other than a possible distribution of the
Shares from Watanabe PC to Shareholder. Neither Watanabe PC nor Shareholder is a
party to any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participation to any such person or any third party with
respect to the Shares. Watanabe PC and Shareholder acknowledge and understand
that the Shares are being offered and sold without registration under the 1933
Act or any state securities law based on exemptions provided under such laws,
and that the representations contained in this Agreement are being relied upon
by GD Sub and GDSC in connection with those exemptions. Watanabe PC and
Shareholder further acknowledge and agree that the Shares are "restricted
securities" under federal securities laws and as such may not be sold or
disposed of unless they are registered under the 1933 Act and all applicable
state securities laws or unless, in the opinion of counsel acceptable to GD Sub
and GDSC, exemptions from the registration requirements of the 1933 Act and all
applicable state securities laws are available. In this regard,Watanabe PC and
Shareholder acknowledge that GDSC is under no obligation to register
5
the Shares, that the Shares will not be eligible for resale in the public market
pursuant to Rule 144 under the 1933 Act until one year after the Closing Date,
and that Watanabe PC and Shareholder will bear the economic risk of ownership of
the Shares at least until that time. Watanabe PC and Shareholder consent to
having appropriate legends placed on the certificates representing the Shares
relating to this restriction on transfer.
3.05 Access to Information. Shareholder has received and carefully reviewed
GDSC's Annual Report on Form 10-KSB for the year ended December 31, 1997, GDSC's
Quarterly Report on Form 10-QSB for the quarter ended March 31, 1998, and the
Registration Statement. Shareholder believes he has received all of the
information he considers necessary or appropriate for deciding whether to
acquire shares of GDSC Common Stock. Shareholder further represents that he has
had an opportunity to ask questions and receive answers from GDSC regarding
GDSC, its business and financial condition, and the terms and conditions of the
Agreement.
3.06 Sophistication. Shareholder, together with his purchaser
representative, if any, has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of an
investment in the Shares and has the capacity to protect his own interests in
connection with the transaction.
3.07 Accuracy of Representations and Warranties. None of the
representations or warranties of Watanabe PC 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. Watanabe PC and Shareholder do not know of any fact that has
resulted or that, in the reasonable judgment of Watanabe PC or Shareholder will
result, in any material adverse change in Watanabe PC's business, results of
operation, financial condition or prospects that has not been set forth in this
Agreement.
ARTICLE IV
Joint Covenants
GD Sub,Watanabe PC and Shareholder covenant and agree that they will act in
accordance with the following:
4.01 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 5 or
6 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 4.01 shall limit the rights of the parties under Articles 5, 6 and 7.
6
ARTICLE V
Conditions to Obligations of GD Sub
The obligations of GD Sub under Article 1 are, at its option, subject to
satisfaction, at or prior to the Closing, of each of the following conditions:
5.01 Representations, Warranties and Covenants.
5.01-1 All representations and warranties of Watanabe PC 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.
5.01-2 All of the terms, covenants and conditions to be complied with
and performed by Watanabe PC and Shareholder at or prior to the Closing shall in
all material respects have been complied with or performed thereby.
5.02 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, GD Sub,Watanabe PC or Shareholder to restrain or
prohibit, or obtain damages in respect of, this Agreement or the transactions
contemplated by this Agreement.
5.03 Management Agreement. The PDS Management Agreement shall have been
amended and restated as a Management Agreement with GD Sub in the form attached
hereto as Exhibit B, and Watanabe PC shall have executed and delivered such
Management Agreement.
5.04 Shares Acquisition Agreement. Watanabe PC and Shareholder shall have
executed and delivered a Shares Acquisition Agreement in the form attached
hereto as Exhibit C.
5.05 Dentist Employment Agreement. Shareholder shall have executed and
delivered a Dentist Employment Agreement with Watanabe PC shall have executed
and delivered in the form attached hereto as Exhibit D.
5.06 Closing of PDS Transaction. The transactions contemplated by the PDS
Asset Agreement shall close simultaneously with the Closing.
5.07 Actions Satisfactory to GD Sub'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 GD Sub.
7
ARTICLE VI
Conditions to Obligations of Watanabe PC
The obligations of Watanabe PC under Article I are, at its option, subject
to satisfaction, at or prior to the Closing, of each of the following
conditions:
6.01 Representations, Warranties and Covenants.
6.01-1 All representations and warranties of GDSC and GD Sub 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.
6.01-2 All of the terms, covenants and conditions to be complied with
and performed by GDSC and GD Sub on or prior to the Closing shall in all
material respects have been complied with or performed by GDSC and GD Sub.
6.02 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, GD Sub, PDS or any Shareholder to restrain or prohibit
this Agreement or the transactions contemplated by this Agreement.
6.03 Stock Price. The Stock Price shall not be less than $4.00 per share of
GDSC Common Stock.
ARTICLE VII
Termination
7.01 Right of Parties to Terminate. This Agreement may be terminated:
7.01-1 by GD Sub, if Watanabe PC or Shareholder or any of them shall
have breached any of their obligations hereunder in any material respect;
7.01-2 by Watanabe PC, if GD Sub shall have breached any of its
obligations hereunder in any material respect or if the Stock Price falls below
$4.00; or
7.01-3 by either Watanabe PC or GD Sub, by written notice to the other
party, if the Closing shall not have occurred on or prior to March 31, 1999;
provided, however, that the right to terminate this Agreement under this Section
7.01-3 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
7.02 Effect of Termination. If either GD Sub or Watanabe PC decides to
terminate this Agreement pursuant to Section 7.01, 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 7.01, the parties hereto shall be
released from all liabilities and obligations arising under this Agreement
(other than those described in Article 9 hereof) with respect to the matters
contemplated by this Agreement, other than for damages arising from a breach of
this Agreement.
ARTICLE VIII
Survival; Indemnification
8.01 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
and one-half years 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.
8.02 Indemnification by Watanabe PC and Shareholder.
8.02-1 Notwithstanding any investigation by GDSC or GD Sub, from and
after the Closing, Watanabe PC and Shareholder shall indemnify, hold harmless
and, to the extent provided in Section 8.04-1, defend GDSC, GD Sub, and their
respective subsidiaries, shareholders, affiliates, officers, directors,
employees, agents, successors and assigns (collectively, "GD Sub's Indemnified
Persons") from and against, and reimburse each of GD Sub'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 GD
Sub's Indemnified Persons by reason of or arising out of or in connection with:
(a) any material breach or inaccuracy of any representation or
warranty of Watanabe PC or Shareholder, or any of them, made in this Agreement
or any Related Document; or
(b) any failure by Watanabe PC or Shareholder, or any of them, to
perform any covenant required to be performed by them pursuant to this Agreement
or any Related Document after reasonable opportunity to cure.
8.02-2 This indemnification extends to any Damages suffered by any of
GD Sub's Indemnified Persons, whether or not a claim is made against any of GD
Sub's Indemnified Persons by any third party.
9
8.03 Indemnification by GD Sub.
8.03-1 Notwithstanding any investigation by Watanabe PC or
Shareholder, from and after the Closing, GDSC and GD Sub shall indemnify, hold
harmless and, to the extent provided in Section 8.04-1, defend Watanabe PC,
Shareholder, and their respective partners, affiliates, officers, employees,
agents, successors and assigns (collectively, "Watanabe PC's Indemnified
Persons") from and against, and reimburse each of Watanabe PC's Indemnified
Persons with respect to, any and all Damages incurred by any of Watanabe PC's
Indemnified Persons by reason of or arising out of or in connection with:
(a) any material breach or inaccuracy of any representation or
warranty of GDSC or GD Sub made in this Agreement or any Related Document; or
(b) any failure by GDSC or GD Sub to perform any covenant
required to be performed by them pursuant to this Agreement or any Related
Document after reasonable opportunity to cure.
8.03-2 This indemnification extends to any Damages suffered by any of
Watanabe PC's Indemnified Persons whether or not a claim is made against any of
Watanabe PC's Indemnified Persons by any third party.
8.04 Indemnification Procedure.
8.04-1 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 8 with written notice
of all third party actions, suits, proceedings, claims, demands or assessments
that may be subject to the indemnification provisions of this Article 8
(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 8 and, if
so, whether the indemnifying party elects, jointly with any other indemnifying
party notified under Section 8.04-1(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
10
would impose any obligation or duty on the indemnified party, which approval
may, in the sole discretion of the indemnified party, be withheld. So long as an
indemnifying party is contesting the Third Party Claim in good faith and with
reasonable diligence, the indemnified party shall not pay or settle the Third
Party Claim. Notwithstanding the foregoing, the indemnified party shall have the
right to pay or settle any Third Party Claim at any time, provided that in such
event it waives any right to indemnification therefor by the indemnifying party.
(d) If an indemnifying party does not provide notice that it
elects to undertake the good faith settlement or defense of the Third Party
Claim, or if an indemnifying party fails to contest the Third Party Claim or
undertake or approve settlement, in good faith and with reasonable diligence,
the indemnified party shall thereafter have the right to contest, settle or
compromise the Third Party Claim at its exclusive discretion, at the risk and
expense of the indemnifying party, and the indemnifying party will thereby waive
any claim, defense or argument that the indemnified party's settlement or
defense of such Third Party Claim is in any respect inadequate or unreasonable.
(e) A party's failure to give timely notice will not constitute a
defense, in part or in whole, to any claim for indemnification by such party,
except if, and only to the extent that, such failure results in any material
prejudice to the indemnifying party.
8.04-2 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 8 written notice of all claims for indemnification
under this Article 8, other than Third Party Claims, including, in reasonable
detail, the basis for the claim, the nature of Damages and a good faith estimate
of the amount of Damages.
(b) Each indemnifying party shall have 30 days after its receipt
of the claim notice to notify the indemnified party in writing whether or not
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.
8.05 Right of Offset. At the election of GD Sub, any liability of Watanabe
PC or any Shareholder under Section 8.02 which has been established by
agreement, litigation or in accordance with the procedure set forth in Section
8.04 may be satisfied by offsetting such liability against any Earnout
Consideration then due or that subsequently becomes due. For this purpose, a
liability shall not be deemed to have been established in accordance with the
procedure set forth in Section 8.04 if Watanabe PC or the Shareholder has
asserted under Section 8.04-1(b) that the liability is not subject to this
Article 8 and the question has not been resolved by agreement or litigation.
11
8.06 Rights Not Exclusive. An indemnified party's rights to indemnification
under this Article 8 are in addition to, and not in lieu of, any other rights to
which the indemnified party may be entitled at law or in equity.
ARTICLE IX
Confidentiality; Press Releases
9.01 Confidentiality.
9.01-1 No information concerning Watanabe PC not previously disclosed
to the public or in the public domain that has been furnished to or obtained by
GDSC or GD Sub 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 GD Sub or used for any purpose other than as contemplated herein. If
the transactions contemplated by this Agreement are not consummated, GDSC and GD
Sub shall hold such information in confidence for a period of four years from
the date of any termination of this Agreement, and all such information that is
in writing or embodied on a diskette, tape or other tangible medium shall be
promptly returned to Watanabe PC.
9.01-2 No information concerning GDSC or GD Sub not previously
disclosed to the public or in the public domain that has been furnished to or
obtained by Watanabe PC 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 Watanabe PC or used for any purpose other than
as contemplated herein. If the transactions contemplated by this Agreement are
not consummated, Watanabe PC and Shareholder shall hold such information in
confidence for a period of four years from the date of any termination of this
Agreement, and all such information that is in writing or embodied on a
diskette, tape or other tangible medium shall be promptly returned to GD Sub.
9.01-3 Notwithstanding the foregoing, such obligations of GD Sub and
of Watanabe PC shall not apply to information
(a) that is, or becomes, publicly available from a source other
than GD Sub or Watanabe PC, as the case may be;
(b) that was known and can be shown to have been known by GD Sub
at the time of its receipt from Watanabe PC, or by Watanabe PC at the time of
its receipt from GD Sub, as the case may be;
(c) that is received by GD Sub from a third party without breach
of this Agreement by GD Sub, or is received by Watanabe PC from a third party
without breach of this Agreement by Watanabe PC, as the case may be;
(d) that is required by law to be disclosed; or
12
(e) that is disclosed in accordance with the written consent of
GD Sub or of Watanabe PC, as the case may be.
9.02 Press Releases. No press releases or other public announcements
concerning the transactions contemplated by this Agreement shall be made by
Watanabe PC without the prior written consent of GD Sub; 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 X
Other Provisions
10.01 Benefit and Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns. No party hereto may voluntarily or involuntarily assign such
party's interest under this Agreement without the prior written consent of the
other parties.
10.02 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.
10.03 Fees and Expenses. GDSC and GD Sub shall be solely responsible for
all costs and expenses incurred by them, and Watanabe PC shall be solely
responsible for all costs and expenses incurred by Watanabe PC, in connection
with the negotiation, preparation and performance of and compliance with the
terms of this Agreement.
10.04 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.
10.05 Headings. The headings are for convenience only and will not control
or affect the meaning or construction of the provisions of this Agreement.
10.06 Governing Law. The construction and performance of this Agreement
will be governed by the laws of the State of Washington (except for the choice
of law provisions thereof).
10.07 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:
13
In the case of GDSC or GD Sub:
Stoel Rives LLP
900 SW Fifth Avenue, Suite 2300
Portland, OR 97204
Telecopy No.: (503) 220-2480
Attention: Edward L. Epstein
In the case of Watanabe PC or Shareholder:
Miller & Holguin
1801 Century Park East, 7th Floor
Los Angeles, CA 90067
Telecopy No.: (310) 557-2205
Attention: Henry Holquin
10.08 Breach; Equitable Relief. The parties acknowledge that the Dental
Practices 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.
10.09 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.
10.10 Guarantee. GDSC irrevocably and unconditionally guarantees that GD
Sub will perform each and every obligation of GD Sub under this Agreement and
waives and agrees not to assert or take advantage of any of the following to the
extent they might apply: (a) any right to require Watanabe PC or Shareholder to
proceed against GD Sub, it being understood and agreed that Watanabe PC and
Shareholder may proceed against GDSC without first proceeding against GD Sub or
any other person or entity; (b) Watanabe PC's or Shareholder's failure to file
or enforce any claim in any bankruptcy or insolvency proceedings against GD Sub;
(c) any presentment, demand, protest or notice of any kind to GDSC, including
without limitation, notice of the acceptance of this guarantee, or of any action
or nonaction on the part of GD Sub under this Agreement; or (d) any right to
prior notice and approval of any extension of the time for payment of any
amounts or performance of any obligations due under this Agreement or any other
modification, alteration or change of this Agreement.
14
10.11 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
GD SUB: GENTLE DENTAL MANAGEMENT, INC.
By: L.T. VAN EERDEN
-------------------------------------
Title: Executive Vice President
Watanabe PC: BRYAN WATANABE, D.D.S., INC.
By: BRYAN WATANABE, D.D.S.
-------------------------------------
Title: Pres.
----------------------------------
Shareholder: BRYAN WATANABE, D.D.S.
-----------------------------------------
Bryan Watanabe, D.D.S.
15