Exhibit 10.1
Dental Cooperative
Affiliate Member
Practice Purchase
Agreement
This Affiliate Member Practice
Purchase Agreement (the
“Agreement”) is effective on the date specified in
Section 9.11, by and among DENTAL COOPERATIVE, INC., a Utah
corporation (“Dental Cooperative”); the Provider; and
those natural persons, if any, who own Provider
(“Dentist(s)”), all as specified on the Signature Page.
THIS AGREEMENT SUPERCEDES ANY AND ALL PRE-EXISTING AGREEMENTS OR
UNDERSTANDINGS AMONG THE PARTIES, WHETHER IN WRITING OR OTHERWISE.
ANY SEPARATE WRITING PURPORTING TO ALTER THE UNDERSTANDINGS SET
FORTH BELOW OR EXEMPT A PROVIDER FROM ANY OF THE UNDERSTANDINGS
BELOW MUST BE IN WRITING AND REFERENCE EXPLICITLY THE INTENT TO
MODIFY THIS AGREEMENT.
RECITALS
WHEREAS , Dental Cooperative has entered into the
business of acquiring, operating and selling dental practices of
retiring dentists or dentists that are relocating.
WHEREAS , Dental Cooperative is interested in acquiring
the Dental Practice and Provider is interested in selling the
Dental Practice to Dental Cooperative.
WHEREAS , as consideration for the sale of the Dental
Practice, Dental Cooperative is willing to refer Provider to an
entity selected by Dental Cooperative for a loan to Provider in the
amount of twenty percent (20%) of the Purchase Price of the Dental
Practice. Additionally, Dental Cooperative will advance to Provider
120,000 Common Shares of DPCA stock, 24,000 shares at closing and
24,000 shares at the end of years one (1) through four (4). Then,
at the end of the five (5) year period, if the Provider elects to
complete the sale of the Dental Practice pursuant to the terms of
this Agreement, the loan will have been repaid in full, and the
remaining payment of one-half of the purchase price will be paid to
Provider.
WHEREAS , during this five (5) year period, Provider
will independently manage and maintain the Dental Practice, for
which a percent of the margin relating to the operating of the
Dental Practice will be paid to Dentist(s) and a percent of the
margin will be retained by Dental Cooperative, all as further
described in a Management Agreement, to be executed
contemporaneously herewith.
NOW, THEREFORE
, in consideration of the mutual
conditions, representations and covenants contained herein, and for
other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1
Definitions. For purposes of this Agreement and each of the
Operative Documents (unless otherwise defined herein or therein),
the following terms shall have the following meanings:
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“Approved Liabilities”
has the meaning set forth in Section
3.5.
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“Closing” and “Closing Date” have the
respective meanings set forth in Article 6.
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“Company” means Dental Patient Care America, Inc., the
parent of Dental Cooperative.
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“Collections”
means the gross revenues of the
Dental Practice arising from the sale of any and all services
and/or products in a given period accounted for on a cash basis,
representing amounts paid by patients or by insurers or their
representatives for services or products and any other revenue of
the Dental Practice.
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“Confidential
Information” has
the meaning set forth in Section 9.1.
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“Dental
Office” means the
location or facility specified on the Signature Page (or in an
attachment thereto) from which the Provider provides Dental
Services. This term will include, if applicable, mobile
facilities.
“Dental
Practice” means
Provider’s business of providing Dental Services and all
tangible and intangible assets of that business, including but not
limited to cash on hand and accounts receivable, and all licenses
and leaseholds needed for the conduct of such business. The Dental
Practice does not, however, include any patient list or HIPPA
(Health Information Portability and Privacy Act) protected health
information.
“Dental
Professional” means
any licensed dental professional working at a Dental Practice,
whether an independent contractor or employee, including any
dentist, dental hygienist, anesthetist and other such position for
which licensure is required by law, who is employed or otherwise
retained by the Provider to provide Dental Services to
patients.
“Dental
Services” means all
dental and related health care services, including without
limitation, examination, diagnosis, preventive care, restoration,
surgery and other therapy.
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“Dentist(s)” has the meaning noted in the introduction to
this Agreement.
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“Funding Notice”
has the meaning set forth in Section
9.11.
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“Guaranty”
means the Guaranty to be executed
and delivered by the Dentist(s), the form of which is attached
hereto as Exhibit “A”, which will assure and guaranty
the Provider’s compliance with this Agreement, including the
transfer of the Dental Cooperative Margin Allocation as described
in the Management Agreement.
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“Indemnified Party”
and “Indemnifying
Party” have the meanings set forth in Section
9.2(c).
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“Lender”
means the entity that makes the
Loan. The lender will be an entity identified by Dental Cooperative
and reasonably acceptable to Dentist.
“Loan”
means the cash sum loaned to
Provider through the Promissory Note. The loan will be in a
principal amount equal to one-half of the purchase price of the
Dental Practice.
“Management
Agreement” means
the agreement to be executed contemporaneously herewith whereby
Provider will manage the Dental Practice.
“Market
Price” means, as of
a specific date, the average of the last reported sale prices for
the last fifteen trading days as officially reported by the
principal securities exchange on which the Company’s common
stock is listed or admitted to trading during said period, or, if
the Company’s common stock is not listed or admitted to
trading on any national securities exchange during said period, the
average closing bid price of the common stock on the Nasdaq Stock
Market System or reported on the NASD’s OTC Bulletin Board or
the Pink Sheets or, if the Company’s common stock is not
quoted on Nasdaq, the OTC Bulletin Board or the Pink Sheets, as
determined in good faith by resolution of the board of directors of
the Company, based on the best information available to
it.
“Material Adverse
Change” means any
effect or change that would be (or could reasonably be expected to
be) materially adverse to the business, assets, condition
(financial or otherwise), operating results, operations, or
business prospects of the Dental Practice (regardless of whether or
not such adverse effect or changes can be or has been cured at any
time or whether Dental Cooperative has knowledge of such effect or
changes on the date hereof or at any time hereafter), including any
adverse changes, event, development, or effect arising from or
relating to the taking of any action contemplated by this Agreement
and the other agreements contemplated hereby.
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“Operative
Document” means
each of this Agreement, the Management Agreement, the Guaranty, and
every other document or certificate to be executed and delivered
between or among the parties listed on the signature page in
connection with the transactions described herein.
“Practice
Valuation” means an
amount selected by Provider which amount shall not be greater than
the amount of Collections during any consecutive twelve (12) month
period during the twenty-four (24) month period immediate prior to
the Closing. The amount of the Practice Valuation is set forth on
the Signature Page of this Agreement.
“Promissory
Note” means the
promissory note that Provider will execute evidencing
Provider’s obligation to repay the Loan.
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“Provider” has the meaning noted in the introduction to
this Agreement.
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“Stock
Allocation” means
that allocation of shares of the Company’s restricted common
stock advanced to the Provider in five (5) equal amounts, as
described in the recitals to this Agreement, the first advancement
on Closing and the remaining four advancements at the end of years
one (1) through four (4), as part of the purchase payment for the
practice.
“Transfer
Date” means the
date on which all right, title and interest in and to the Dental
Practice is transferred from Provider to Dental
Cooperative.
ARTICLE 2
OPERATIVE DOCUMENTS AND LOAN
DOCUMENTS
Concurrently with the execution of
this Agreement, the Provider, Dental Cooperative and the Dentist(s)
agree to and will execute the Operative Documents and other
documents described below. Each of the Operative Documents is an
integral part of the agreement described herein, and the
effectiveness of each Operative Document is a condition to the
effectiveness of this Agreement and the other Operative
Documents.
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Section 2.1
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Promissory Note and Loan
Documents.
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(a)
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Dental Cooperative will refer a Loan to
Provider; and
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(b) Provider
will grant to Lender a first position security interest, if
required by Lender, in all assets and legal rights of the Dental
Practice to secure the Loan and Provider’s obligations
thereunder; and
(c) Dentist(s)
will grant to Lender a first position security interest, if
required by Lender, in all of Dentist(s) rights and interest in
Dentist(s) shares/membership interest or other ownership interest
in Provider to secure Dentist(s) obligations under the Promissory
Note and related loan documents.
(d) The
Dentist(s) will guaranty to Lender, if required by Lender, that
Provider will repay the Loan in full as and when due under the
provisions of the Promissory Note.
Section 2.2
Guaranty. The Dentists will guaranty Dental Cooperative that
the Provider will comply with the undertakings of this Agreement
and the Operative Documents, including, but not limited to, the
transfer of the Dental Cooperative Margin Allocation and other
amounts payable to Dental Cooperative under the Management
Agreement.
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ARTICLE 3
THE LOAN, TRANSFER OF RETAINED
DENTAL COOPERATIVE MARGIN ALLOCATION AND SATISFACTION OF
LIABILITIES
Section 3.1
Advance and Payment of the Loan. The Loan will be advanced
to Provider at or following the Closing and will be evidenced by
the Promissory Note. The Loan will originate with the
Lender.
The interest rate on the Loan will
be set at the time of closing. The specific terms governing payment
of the Promissory Note will be contained in the Promissory Note,
the form of which will be provided by Lender.
Section 3.2
Transfer of Payments to Lender. Provider shall make
necessary arrangements that are reasonably acceptable to Lender to
institute an automatic transfer mechanism to transfer the monthly
amounts that are payable to Lender under the Loan. During the term
of this Agreement, the amount of the Dental Cooperative Margin
Allocation to be transferred to Dental Cooperative, will be reduced
by an amount equal to the monthly payments due by Provider to
Lender under the Loan.
Section 3.3
Loan Repayment. The Loan will be due and payable according
to the terms of the Promissory Note.
Section 3.4
Principal Amount of the Loan. The principal amount of the
Loan shall be equal to twenty percent (20%) of the amount of the
Practice Valuation.
Section 3.5
Satisfaction of Liabilities . Except as otherwise agreed in
writing by the parties, Provider shall use such portion of the Loan
proceeds as is necessary to retire all liabilities relating to the
Dental Practice, except for current liabilities incurred in
Provider’s ordinary course of business in operating the
Dental Practice and liabilities arising from equipment and
facilities leases relating directly to the Dental Practice
(collective, “Approved Liabilities”). Furthermore,
Provider and Dentist(s) covenant that during the term of this
Agreement Provider shall not incur any liabilities nor shall the
assets of the Dental Practice become encumbered in any way by
obligations or liabilities that are not Approved
Liabilities.
ARTICLE 4
SPECIAL COVENANTS OF
NON-COMPETITION
AND
NON-SOLICITATION
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Section 4.1
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Non-Competition.
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(a) Each
of Dentist(s) and Provider agrees that, during the term of this
Agreement and for the twenty-four (24) months following the
Transfer Date, Dentist(s) and Provider shall not directly or
indirectly engage in, manage, operate, join, control or participate
in the ownership, management, operation or control of, or be
employed or engaged or act as a consultant to or in any manner by,
any dental practice management business competing with Dental
Cooperative.
(b) Each
of Dentist(s) agrees that, during the term of this Agreement and
for the twenty-four (24) months following the Transfer Date,
Dentist(s) shall not directly or indirectly provide Dental Services
within a fifty-mile radius of the Dental Practice.
Section 4.2
Reasonableness of Restrictions. Each of Dentist(s) and
Provider has carefully read and considered the provisions of this
Article 4 and, having done so, agrees that the restrictions set
forth in this Article contain reasonable limitations as to time,
geographical area, scope of activity to be restrained, and do not
impose a greater restraint than is necessary to protect the
goodwill or other legitimate business interests of Dental
Cooperative. Each of Dentist(s) and Provider further understands
and agrees that, if at some later date, a court of competent
jurisdiction determines that the scope, duration or geographic area
of any covenant set forth in this Article is overbroad or
unenforceable for any reason, these covenants shall be reformed by
the court to the minimum extent necessary in order to make such
covenants valid, legal and enforceable under applicable
law.
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Section 4.3
Remedies. In the event of an actual or threatened breach of
the covenants in this Article 4 by Provider or Dentist(s), Dental
Cooperative shall be entitled to pursue such injunctive remedies as
may be provided by law or equity, without the necessity of posting
a bond, cash or otherwise. The foregoing injunctive relief shall be
without prejudice and in addition to any other action or remedy
permitted to Dental Cooperative under this Agreement or the
Operative Documents or as otherwise permitted under the
law.
ARTICLE 5
REPRESENTATIONS AND
WARRANTIES
Section 5.1
Representations and Warranties of the Provider and
Dentist(s) . Each of the Provider and Dentist(s), as
applicable, hereby represents and warrants to Dental Cooperative as
of the Closing Date and throughout the Term of this Agreement, as
follows:
(a) The
Provider is a legal entity duly organized, validly existing and in
good standing under the laws of its state of organization and has
all requisite corporate, company or partnership power and authority
(as applicable) to enter into this Agreement and to consummate the
transactions contemplated hereby.
(b) Each
of this Agreement and the other Operative Documents have been duly
executed and delivered by Provider, have been effectively
authorized by all necessary action, corporate or otherwise, and
constitute a legal, valid and binding obligation of
Provider.
(c) Appendix
“1” to this Agreement is a listing of all real and
personal property owned or leased by Provider and used in the
Dental Practice. The Provider owns all of the real and personal
property so listed free and clear of any and all liens, leases,
security interests, mortgages, pledges or other encumbrances,
except for encumbrances arising out of the transactions described
herein or otherwise as set forth in Appendix
“1”.
(d) There
are no claims, disputes, actions, proceedings or investigations of
any nature pending or, to the Provider’s and
Dentist(s)’s best knowledge and belief, threatened, against
or involving the Dentist(s) or the Provider or any of their
respective agents that relate in any way to the Dental Practice or
to Dental Services.
(e) Appendix
“2” is a list of all actual and potential claims
required to be disclosed by the Provider and Dentist(s) to their
insurance carrier(s). Neither the Provider nor Dentist(s) have been
informed in writing by any insurance carrier that any claims
against the Provider or Dentist(s) alleging dental malpractice are
not fully covered by insurance, less any deductible.
(f) To
the best of the Provider’s knowledge, all consents,
approvals, authorizations and other requirements prescribed by any
law that must be obtained or satisfied by the Provider to operate
the Dental Practice or to execute and deliver this Agreement and
the Operative Documents have been obtained and satisfied. Provider
shall provide evidence of such approvals and authorizations if
requested at the Closing.
(g) The
information provided by the Provider and Dentist(s) to Dental
Cooperative in this Agreement, or in any Appendix is true in all
material respects and includes all material information which is
necessary or advisable to make the statements and facts contained
herein or therein, in light of the circumstances in which they are
made, not false or misleading. Copies of all documents delivered or
made available to Dental Cooperative pursuant to this Agreement are
or will be complete and accurate copies of such
documents.
(h) Appendix
3 is a complete and correct list of all material contracts,
obligations and commitments relating to the Dental Office and the
Dental Practice (whether written or oral), including without
limitation all (i) employment contracts, (ii) collective bargaining
agreements, (iii) bonus, pension, profit sharing, annuity, deferred
compensation, retirement, stock purchase, stock option, stock
ownership, hospitalization, insurance and all other employee
benefit plans, and (iv) leases, mortgages, pledges, deeds of trust,
loans or credit agreements, contracts, and agreements not made in
the ordinary course of business that involve more than $2,500.00.
Except as noted, all such commitments are in full force and
effect.
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(i) Appendix
4 contains all financial statements, tax returns, and accounts
receivable aging reports given to Dental Cooperative. The same are
true, correct and complete. Provider’s books of account have
been kept in the ordinary course of business in accordance with the
Provider’s regular method of accounting, reflect bona
fide transactions, and fairly reflect items reportable in
accordance with that method of accounting. No Material Adverse
Change has occurred in the Provider or in the Dental Practice since
the date of such financial statements.
(j) Provider
and Dentist(s) have had an opportunity to consult with their
respective professional tax and legal advisors concerning this
Agreement, and the other Operative Documents.
(k) To
the best of Dentist(s)’s knowledge and belief, as of the date
of this Agreement and as of the Closing Date, Dentist(s) suffers
from no debilitating or degenerative disease that he has not
disclosed to Dental Cooperative, which illness or condition would,
based on known medical probabilities, make performance of
Dentist(s)’s obligations under this Agreement or the
Management Agreement difficult or impossible.
Each of the Appendices attached to
this Agreement shall be updated within thirty (30) days as and if
requested by Dental Cooperative. Upon the request of Dental
Cooperative, Provider shall make available copies of all agreements
and commitments referred to in this Section 5.1.
Section 5.2
Representations and Warranties of Dental Cooperative .
Dental Cooperative hereby represents, warrants and covenants to the
Provider as follows:
(a) Dental
Cooperative is a corporation duly organized, validly existing and
in good standing under the laws of the State of Utah and has all
requisite corporate power and authority to enter into the Agreement
and to consummate the transactions contemplated hereby.
(b) Each
of this Agreement and the other Operative Documents has been duly
executed and delivered by Dental Cooperative, has been effectively
authorized by all necessary action, corporate or otherwise, and
constitutes a legal, valid and binding obligation of Dental
Cooperative.
(c) The
execution and delivery of this Agreement and the other Operative
Documents, the consummation of the transactions contemplated hereby
and thereby, and the fulfillment of the terms hereof and thereof
will not (i) result in a material liability to Dental Cooperative,
or (ii) result in a breach of any of the terms or provisions of or
constitute a default under or conflict with, any material
agreements, indenture or other instrument to which Dental
Cooperative is a party or by which it is bound, or any law
applicable to Dental Cooperative or (iii) provide a basis for the
acceleration of any indebtedness, liability or obligation of Dental
Cooperative.
ARTICLE 6
CLOSING
Section 6.1
Closing. The Closing shall occur on the effective date, as
described in Section 9.11 hereof; provided that the Transfer Date
shall be at the time specified in Article 8. It is anticipated,
however, that the Operative Documents will be executed in advance
of the Closing. The Closing may take place in a single location or
by means of overnight delivery services and in the form of
counterpart signature pages.
Section 6.2
Conditions to Closing. The parties’ duty to close
shall be subject to the fulfillment or waiver, on or before the
Closing, of all of the conditions set forth below:
(a) No
claim, action, suit, investigation or other proceeding shall be
pending or threatened before any court or governmental agency that
presents a substantial risk of restraint or prohibition of the
transaction contemplated by this Agreement or any other Operative
Document.
(b) The
representations and warranties of the parties hereto shall be true
and correct in all material respects, and the obligations and
undertakings of the parties to be performed prior thereto shall
have been performed in all material respects as of such
time.
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(c) (i)
the operation of the Dental Practice shall have been conducted in
the ordinary course of business, consistent with past practices,
during any period covered by this Affiliate Member Practice
Purchase Agreement;
(ii) there shall not have occurred
any damage, destruction or loss with respect to Provider’s
assets used in the Dental Practice, whether or not covered by
insurance; and
(iii) during any period covered by
this Affiliate Member Practice Purchase Agreement there shall not
have occurred any other event or condition which has had or which
reasonably may be expected to have a materially adverse effect on
the value of the Dental Practice, on the operation of the Dental
Office, or on the ability of the Provider, Dentist(s) or Dental
Cooperative to consummate the transactions contemplated
herein.
(d) The
parties shall have seen and approved, on or before the Closing
Date, each of the Operative Documents and all other needed
instruments, fully executed by them respectively.
(e) Provider
and Lender shall have entered into a written loan agreement for the
Loan to Provider.
ARTICLE 7
DEFAULT
Section 7.1
Events of Default. Any one or more of the following events
or situations shall be regarded as an “Event of
Default” under this Agreement, provided that the defaults
described in (c), (d), (j), and (k) shall not be deemed actionable
defaults until written notice of the default has been given by the
nondefaulting party, and there has been a failure by the defaulting
party to cure the default within 45 days following such
notice.
(a) Failure
by Provider to pay any amount due under this Agreement or under any
other Operative Document within 15 days of its due date; provided
that Dental Cooperative may allow up to an additional 45 days with
respect to this Agreement only in the case of demonstrated economic
need for such an extension.
(b) Election
of Dental Cooperative to terminate the Agreement as a result of
Declining Collections and/or Declining Margins, as such terms are
defined in the Management Agreement.
(c) Dentist(s)
or Provider on the one hand, or Dental Cooperative on the other
hand, fails to fulfill any obligation under this Agreement or any
other Operative Document.
(d) Any
of the representations and warranties made by Dentist(s) and
Provider, on the one hand, or Dental Cooperative on the other hand,
proves to be untrue or incorrect in any material respect when made,
or omits to state a material fact required to be stated in order to
make such statements, in the light of the circumstances under which
made, not misleading on the date made;
(e) Provider
or Dentist(s) shall commence (by petition, application, or
otherwise) a voluntary case or other proceeding under the laws of
any jurisdiction seeking liquidation, reorganization, or other
relief with respect to Provider’s or Dentist(s)’s debts
under any bankruptcy, insolvency, or other similar law now or
hereafter in effect, or seeking the appointment of a trustee,
self-trusteeship, receiver, custodian, or other similar official of
any substantial part of Provider’s or Dentist(s)’s
property; or shall consent (by answer or failure to answer, or
otherwise) to any such relief or to the appointment of or taking
possession by any such official in an involuntary
