-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BTQ4Ip/jT0MpDO7ITPIKv7gK139wJtzGdGOrCKFoz9R2Chpb1UVjPX+KUBCo5tB7 8sFitFMLMbzLYNtXp7uSLg== 0001047469-97-007378.txt : 19971212 0001047469-97-007378.hdr.sgml : 19971212 ACCESSION NUMBER: 0001047469-97-007378 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 56 FILED AS OF DATE: 19971211 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENTEGRA DENTAL GROUP INC CENTRAL INDEX KEY: 0001042291 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-OFFICES & CLINICS OF DOCTORS OF MEDICINE [8011] IRS NUMBER: 760545043 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-37633 FILM NUMBER: 97736080 BUSINESS ADDRESS: STREET 1: 18000 GROESCHKE RD STREET 2: BUILDING A2 PO BOX 218000 CITY: HOUSTON STATE: TX ZIP: 77218 BUSINESS PHONE: 6029521200 MAIL ADDRESS: STREET 1: 2999 N 44TH STREET STREET 2: SUITE 650 CITY: PHOENIX STATE: AZ ZIP: 85018 S-1/A 1 S-1/A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 11, 1997 REGISTRATION NO. 333-37633 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 1 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ PENTEGRA DENTAL GROUP, INC. (Exact name of registrant as specified in its charter) DELAWARE 8021 76-0545043 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of Classification Code Number) Identification incorporation or organization) Number)
------------------------------ PENTEGRA DENTAL GROUP, INC. GARY S. GLATTER 2999 NORTH 44TH STREET, STE. 650 2999 NORTH 44TH STREET, STE. 650 PHOENIX, ARIZONA 85018 PHOENIX, ARIZONA 85018 (602) 952-1200 (602) 952-1200 (Address, including zip code, and (Name and address, including zip code, telephone number, including area code, and telephone number, including area of registrant's principal executive code, of agent for service) offices)
------------------------------ COPIES TO: RICHARD S. ROTH TED W. PARIS JACKSON WALKER L.L.P. BAKER & BOTTS, L.L.P. 1100 LOUISIANA 910 LOUISIANA SUITE 4200 SUITE 3000 HOUSTON, TEXAS 77002 HOUSTON, TEXAS 77002
------------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE. ------------------------------ If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. / / If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. / / ------------------------------ CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED MAXIMUM TITLE OF EACH MAXIMUM AGGREGATE AMOUNT OF CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION TO BE REGISTERED REGISTERED(1) PER SHARE(1) PRICE(2),(3) FEE(4) Common Stock, $.001 par value............ -- -- $31,625,000 $9,584
(1) In accordance with Rule 457(o) under the Securities Act of 1933, as amended, the number of shares being registered and the proposed maximum offering price per share are not included in this table. (2) Includes shares of Common Stock issuable upon exercise of the Underwriters' over-allotment option. (3) Estimated solely for purposes of calculating the registration fee. (4) Previously paid. ------------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. Subject To Completion, Dated December 11, 1997 PROSPECTUS 2,500,000 SHARES PENTEGRA DENTAL GROUP, INC. COMMON STOCK ---------------- All of the shares of Common Stock, par value $.001 per share ("Common Stock"), offered hereby (the "Offering") are being offered by Pentegra Dental Group, Inc. (the "Company"). Prior to the Offering, there has been no public market for the Common Stock. It is currently estimated that the initial public offering price will be between $9.00 and $11.00 per share. See "Underwriting" for a discussion of the factors to be considered in determining the initial public offering price. The Common Stock has been approved for listing on the American Stock Exchange under the symbol "PEN." --------------------- THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 8. --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Underwriting Discounts Price to and Proceeds to Public Commissions(1) Company(2) Per Share......................................... $ $ $ Total(3).......................................... $ $ $
(1) The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"). See "Underwriting." (2) Before deducting estimated expenses of $2,300,000, payable by the Company. (3) The Company has granted the Underwriters a 30-day option to purchase up to 375,000 additional shares of Common Stock on the same terms and conditions as set forth above, solely to cover over-allotments, if any. If such option is exercised in full, the total Price to Public, Underwriting Discounts and Commissions and Proceeds to Company will be $ , $ and $ , respectively. See "Underwriting." --------------------- The shares of Common Stock offered by this Prospectus are offered by the Underwriters, subject to prior sale, to withdrawal, cancellation or modification of the offer without notice, to delivery to and acceptance by the Underwriters and to certain further conditions. It is expected that delivery of certificates representing the shares of Common Stock will be made at the offices of Lehman Brothers Inc., New York, New York, on or about , 1998. --------------------- LEHMAN BROTHERS RAUSCHER PIERCE REFSNES, INC. , 1998 [MAP] THE COMPANY INTENDS TO FURNISH ITS STOCKHOLDERS WITH ANNUAL REPORTS CONTAINING FINANCIAL STATEMENTS AUDITED BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS AND WITH QUARTERLY REPORTS CONTAINING UNAUDITED SUMMARY FINANCIAL INFORMATION FOR EACH OF THE FIRST THREE QUARTERS OF EACH FISCAL YEAR. CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF COMMON STOCK FOLLOWING THE PRICING OF THE OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE COMMON STOCK OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK, AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." 2 PROSPECTUS SUMMARY PENTEGRA DENTAL GROUP, INC. ("PENTEGRA" OR THE "COMPANY") WAS RECENTLY FORMED TO SERVE, UPON COMPLETION OF THE OFFERING, AS THE PARENT CORPORATION OF PENTEGRA INVESTMENTS, INC. ("PII"). CONCURRENTLY WITH THE CLOSING OF THE OFFERING, (I) THE COMPANY WILL ACQUIRE, IN SEPARATE TRANSACTIONS (THE "AFFILIATIONS"), SUBSTANTIALLY ALL THE TANGIBLE AND INTANGIBLE ASSETS, AND ASSUME CERTAIN LIABILITIES, OF 50 DENTAL PRACTICES (COLLECTIVELY, THE "FOUNDING AFFILIATED PRACTICES") IN EXCHANGE FOR CASH AND SHARES OF COMMON STOCK, (II) THE HOLDERS OF COMMON STOCK OF PII WILL EXCHANGE EACH SHARE OUTSTANDING IMMEDIATELY PRIOR TO THE CLOSING OF THE OFFERING (BUT AFTER GIVING EFFECT TO A REPURCHASE BY PII OF SHARES OF ITS COMMON STOCK, AT A PURCHASE PRICE OF $.01 PER SHARE, SUCH THAT THE TOTAL NUMBER OF SHARES OF COMMON STOCK ISSUABLE IN CONNECTION WITH THE AFFILIATIONS AND THE SHARE EXCHANGE WILL NOT EXCEED 3,941,898 SHARES) FOR SHARES OF COMMON STOCK ON A ONE-FOR-ONE BASIS (THE "SHARE EXCHANGE") PURSUANT TO AN EXCHANGE AGREEMENT, (III) THE COMPANY WILL ACQUIRE (THE "PENTEGRA/ NAPILI TRANSACTION") SUBSTANTIALLY ALL OF THE ASSETS OF TWO COMPANIES CONTROLLED BY THE COMPANY'S CHAIRMAN OF THE BOARD, PENTEGRA, LTD. AND NAPILI, INTERNATIONAL ("NAPILI"), (IV) PII WILL REPURCHASE 245,835 SHARES OF ITS CLASS B PREFERRED STOCK, PAR VALUE $0.01 PER SHARE ("CLASS B PREFERRED"), AT THE SUBSCRIPTION PRICE PER SHARE PAID TO PII FOR THOSE SHARES AND, IMMEDIATELY THEREAFTER, REDEEM ALL OF THE REMAINING SHARES OF ITS CLASS A PREFERRED STOCK, PAR VALUE $0.01 PER SHARE ("CLASS A PREFERRED") AND CLASS B PREFERRED AT A REDEMPTION PRICE OF $2.00 PER SHARE (THE "REPURCHASE AND REDEMPTION") AND (V) THE COMPANY WILL REPAY APPROXIMATELY $350,000 OF INDEBTEDNESS OUTSTANDING UNDER PROMISSORY NOTES ISSUED BY THE COMPANY IN CONNECTION WITH ITS ORGANIZATIONAL FINANCING. THE NUMBER OF SHARES OF COMMON STOCK TO BE ISSUED IN EACH AFFILIATION WILL DEPEND ON THE INITIAL PUBLIC OFFERING PRICE OF THE COMMON STOCK. ACCORDINGLY, THE DISCLOSURES HEREIN RELATING TO THE SHARES OF COMMON STOCK ISSUED IN CONNECTION WITH THE AFFILIATIONS AND THE SHARE EXCHANGE ARE ESTIMATED, BASED ON AN ASSUMED INITIAL PUBLIC OFFERING PRICE OF $10.00 PER SHARE (THE MIDPOINT OF THE ESTIMATED INITIAL PUBLIC OFFERING PRICE RANGE). HOWEVER, SO LONG AS THE INITIAL PUBLIC OFFERING PRICE IS LESS THAN $12.00, THE NUMBER OF SHARES OF COMMON STOCK TO BE ISSUED IN CONNECTION WITH THE AFFILIATIONS AND THE SHARE EXCHANGE WILL NOT EXCEED 3,941,898 SHARES IN THE AGGREGATE. PENTEGRA DOES NOT EMPLOY DENTISTS TO PRACTICE DENTISTRY NOR DOES IT OTHERWISE CONTROL THE PRACTICE OF DENTISTRY. UNLESS OTHERWISE INDICATED BY THE CONTEXT, REFERENCES HEREIN TO (I) "PENTEGRA" OR THE "COMPANY" INCLUDE PENTEGRA DENTAL GROUP, INC. AND PII AND (II) "AFFILIATED PRACTICES" MEAN THE FOUNDING AFFILIATED PRACTICES AND ANY DENTAL PRACTICES WITH WHICH THE COMPANY MAY ENTER INTO SIMILAR RELATIONSHIPS IN THE FUTURE. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS (I) GIVES EFFECT TO A REVERSE STOCK SPLIT OF THE OUTSTANDING SHARES OF COMMON STOCK OF PII AND (II) ASSUMES THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED. THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. THE COMPANY Pentegra Dental Group, Inc. was recently formed to provide management, administrative, development and other services to dental practices throughout the United States. The Company's approach to dental practice management (the "Pentegra Dental Program") was developed by Dr. Omer K. Reed, the Chairman of the Board of the Company, and is designed to increase revenues and lower costs at Affiliated Practices while freeing the practicing dentists to focus on the delivery of high-quality care. The Company will earn management service fees under long-term service agreements with Affiliated Practices (the "Service Agreements"). In most cases, service fees payable to the Company under the Service Agreements represent a share of the Affiliated Practices' operating profits, thereby providing incentives for the Company and the Affiliated Practices to work together to maximize practice profitability. The Company will also seek to grow by acquiring and affiliating with additional dental practices. The Company has entered into definitive acquisition agreements and Service Agreements with 50 Founding Affiliated Practices, which include 77 dentists and 63 dental offices located in 18 states. The Founding Affiliated Practices are primarily general dentistry practices, but also include specialists such as periodontists, pedodontists and oral surgeons. In addition, the Company will acquire from Dr. Reed the 3 assets of a consulting firm, Pentegra, Ltd., which was founded in 1988, and a seminar company, Napili, which was founded in 1963. The clinical, administrative and marketing training developed and provided by these companies to practicing dentists and their teams are the foundation for the Pentegra Dental Program. After completion of the Offering, the Pentegra Dental Program will be available exclusively to Affiliated Practices. The Health Care Finance Administration ("HCFA") estimates that in 1995 approximately $43 billion was spent in the United States on dental services, and projects annual dental expenditures will reach $79 billion in the year 2005. In a 1995 survey, the American Dental Association ("ADA") reported that there were approximately 153,000 active dentists in the United States, approximately 88% of whom were practicing either alone or with only one other dentist. In recent years, dentists have begun to consolidate into affiliated groups and with practice management companies. Dentists who affiliate with practice management companies gain several benefits, such as opportunities to achieve economies of scale, to implement cost management techniques and to gain access to capital for new equipment and other working capital needs. The Company's objective is to become a leader in providing dental practice management services. In order to achieve this objective, the Company's strategy includes the following elements: - FOCUS ON TRADITIONAL FEE-FOR-SERVICE DENTAL CARE. According to the 1997 Mercer Consulting Group Survey of Employer-Sponsored Health Plans, approximately 86% of the respondents in that survey reported that they offer their employees dental plans that pay for dental services on a fee-for-service basis. The Company believes that fee-for-service care is high-quality, highly profitable and professionally rewarding for dentists. - INCREASE PRODUCTIVITY AND PROFITABILITY OF AFFILIATED PRACTICES BY IMPLEMENTING THE PENTEGRA DENTAL PROGRAM. The Pentegra Dental Program involves implementing techniques designed to increase revenues and lower costs, as well as methods to make the dentist and his or her practice team more efficient in the delivery of dental care. - LOWER OPERATING COSTS BY ACHIEVING ECONOMIES OF SCALE. The Company believes that, as a result of its size and resources, it will be able to provide Affiliated Practices with certain management functions at lower cost than if the Affiliated Practices were to perform the services by themselves. - FREE THE DENTIST TO FOCUS MORE TIME ON THE PRACTICE OF DENTISTRY. The Company will relieve practicing dentists of administrative tasks. The Company believes its management and administrative support will substantially reduce the amount of time affiliated dentists are required to spend on administrative matters and enable them to dedicate more time and effort toward the growth of their professional practices. - GROW THROUGH ACQUISITIONS AND AFFILIATIONS OF ADDITIONAL DENTAL PRACTICES. The Company will generally seek to affiliate with practices that have high potential for future growth, particularly through implementation of the Pentegra Dental Program, an established reputation for high-quality care and a strategic fit either in an existing market or as an entry into a new market. The Pentegra Dental Program is based on a cooperative approach that emphasizes patient wellness and involves the dentist and his or her patient mutually agreeing on a program to achieve and maintain optimal oral health. The Company believes that the average dentist has the skills necessary to diagnose and provide appropriate care to patients, but many of them have not developed the skills needed to obtain patient acceptances of, and commitments to, the treatment plans. As a result, a significant amount of recommended care may not be completed, with correspondingly lower revenues to the dentists. The Company will provide training and support to assist affiliated dentists and their teams to communicate effectively with each patient regarding the type and value of care needed, to obtain the patient's commitment to a treatment plan and then to implement the agreed-upon treatment. In order to promote operational efficiency and assure quality of care at Affiliated Practices, the Company's information systems 4 will monitor patient treatment plans and track the number and type of procedures performed by each practice. Additionally, the Company will provide the Affiliated Practices with billing and collections, purchasing, inventory management, invoice processing and payment, payroll processing, patient scheduling and financial reporting and analysis relating to the implementation of the Pentegra Dental Program. The Company anticipates that the cost of implementing the Pentegra Dental Program in Affiliated Practices primarily consists of compensation expenses to existing Pentegra, Ltd. and Napili employees and will be comparable to the historical compensation expense levels for those two entities. The Service Agreements with the professional corporations or associations to be formed by the dentist owners of the Founding Affiliated Practices have initial terms of 40 years, subject to earlier termination under certain circumstances. Pursuant to the Service Agreements, the Company will become the exclusive manager and administrator of non-dental services relating to the operation of the Founding Affiliated Practices, and will, among other things, (i) administer the billing and collections for the Founding Affiliated Practices, (ii) provide the necessary clerical, accounting and other non-dental services to the Founding Affiliated Practices and (iii) provide facilities and equipment for the Founding Affiliated Practices. The service fees payable by the Founding Affiliated Practices to the Company under the Service Agreements are based on fair market value of the services to be provided. Generally the service fee are computed based on (i) a percentage of revenues less operating expenses, (ii) a percentage of revenues not to exceed a percentage of revenues less operating expenses, (iii) a specific fixed service fee or (iv) some combination of these. See "Business--Service Agreements." Dentist compensation is determined by the Affiliated Practices pursuant to employment arrangements between the Affiliated Practice and the individual dentists. The Company does not participate in the negotiation of dentist compensation. Pursuant to the terms of the Service Agreements, the Affiliated Practices will continue to provide dental services and will be exclusively in control of all aspects of the practice of dentistry and the provision of dental services. The Company will not engage in the practice of dentistry. As a result of the Affiliations and upon completion of the Offering, the dentist-owners of the Founding Affiliated Practices and the executive officers and directors of the Company will beneficially own approximately 57.4% of the outstanding shares of Common Stock. See "Certain Transactions--Organization of the Company" and "Principal Stockholders." 5 THE OFFERING Common Stock offered by the Company...... 2,500,000 shares Common Stock to be outstanding after the Offering............................... 6,441,898 shares(1) Use of proceeds.......................... To fund the cash distribution to the dentist-owners of the Founding Affiliated Practices (approximately $6.4 million), to fund the Pentegra/Napili Transaction (approximately $200,000), to repurchase or redeem the outstanding shares of preferred stock of PII (approximately $2.8 million), to repay certain indebtedness of Pentegra and the Founding Affiliated Practices (approximately $2.7 million) and the 9.5% promissory notes issued by the Company in connection with its organizational financing ($350,000), to purchase certain accounts receivable of the Founding Affiliated Practices (approximately $428,000) and for general corporate purposes. See "Use of Proceeds." American Stock Exchange symbol........... PEN
- --------- (1) Includes 2,622,269 shares of Common Stock to be issued in connection with the Affiliations and 1,319,629 shares of Common Stock to be issued in connection with the Share Exchange and excludes (i) an aggregate of 671,667 shares of Common Stock issuable upon exercise of stock options to be granted under the Company's 1997 Stock Compensation Plan (the "1997 Stock Compensation Plan") effective on the date the Offering closes at an exercise price equal to the initial public offering price per share and (ii) 1,328,333 shares reserved for future issuance under the 1997 Stock Compensation Plan. See "Management--1997 Stock Compensation Plan." RISK FACTORS The Common Stock offered hereby involves a high degree of risk. See "Risk Factors." 6 SUMMARY FINANCIAL DATA (IN THOUSANDS EXCEPT PER SHARE DATA) Upon completion of the Offering and pursuant to the Affiliations, the Company will acquire substantially all the tangible and intangible assets and assume certain liabilities of the Founding Affiliated Practices. Due to the fact that the Company has had no significant operations to date, no pro forma statement of operations has been included in this Prospectus. The nature and amount of costs to be incurred by the Company in connection with the management services it will provide to the Founding Affiliated Practices may differ from the costs historically incurred by the Founding Affiliated Practices. The summary historical financial information presented below has been derived from the audited financial statements of Pentegra Dental Group, Inc. included in this Prospectus. Except as indicated, the following information does not reflect the effects of the Offering, the Affiliations, the Share Exchange, the Pentegra/ Napili Transaction and the Repurchase and Redemption. For certain information concerning the Affiliations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 4 of Notes to the Pentegra Dental Group, Inc. financial statements.
FOR THE PERIOD FROM INCEPTION (FEBRUARY 21, 1997) THROUGH SEPTEMBER 30, 1997 ------------------- Statement of Operations Data: Revenue...................................................................................... $ -- Expenses General and administrative expenses........................................................ 411 Other expenses............................................................................. 339 ------ Total expenses........................................................................... 750 ------ Net loss................................................................................... $ (750) ------ ------
SEPTEMBER 30, 1997 ---------------------------- HISTORICAL AS ADJUSTED(1) ----------- --------------- Balance Sheet Data: Cash and cash equivalents(2)........................................................... $ 354 $ 9,471 Working capital (deficit).............................................................. (652) 8,586 Total assets........................................................................... 2,071 12,997 Redeemable preferred stock............................................................. 1,089 -- Stockholders' equity (deficit)......................................................... (24) 11,558
- ------------ (1) As adjusted gives effect to (i) the Offering, (ii) the Affiliations, (iii) the repayment of certain indebtedness of Pentegra and the Founding Affiliated Practices, (iv) the Pentegra/Napili Transaction, (v) the Share Exchange and (vi) the Repurchase and Redemption, as if such transactions had occurred on September 30, 1997. See the Unaudited Pro Forma Balance Sheet of Pentegra and the notes thereto included in this Prospectus. (2) See "Use of Proceeds." 7 RISK FACTORS IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, PROSPECTIVE INVESTORS SHOULD CONSIDER THE FOLLOWING FACTORS IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE PURCHASING ANY OF THE SHARES OF THE COMMON STOCK OFFERED HEREBY. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH BELOW AND ELSEWHERE IN THIS PROSPECTUS. ABSENCE OF COMBINED OPERATING HISTORY; NO PRIOR OPERATING EXPERIENCE The Company was incorporated in 1997 and has conducted no operations to date other than in connection with the Offering and the Affiliations. The Company has entered into agreements to acquire substantially all the assets and assume certain liabilities of the Founding Affiliated Practices concurrently with the closing of the Offering. In connection with the Affiliations, the Company is entering into Service Agreements with the Founding Affiliated Practices for initial terms of 40 years (subject to early termination by either party for "cause," which includes a material default by or bankruptcy of the other party). See "Business--Service Agreements." Historically, the Founding Affiliated Practices have operated as separate independent entities. There can be no assurance that the process of integrating the management and administrative functions of the Founding Affiliated Practices will be successful or that the Company's management will be able to manage these operations effectively or implement the Company's operating or expansion strategies successfully. Failure by the Company to implement its operating and expansion strategies successfully would have a material adverse effect on the Company. See "Business--Business Strategy" and "--Service Agreements." RELIANCE ON AFFILIATED PRACTICES AND DENTISTS The Company will receive fees for management services provided to the Affiliated Practices under the Service Agreements. It will not employ dentists or control the practice of dentistry by the dentists employed by the Affiliated Practices, and its management services revenue generally will depend on revenue generated by the Affiliated Practices. In some cases, the management fees will be based on the costs and expenses the Company incurs in connection with providing management services. While the laws of some states permit the Company to participate in the negotiations by Affiliated Practices of managed care contracts, preferred provider arrangements and other negotiated price agreements, the Affiliated Practices will be the contracting parties for those relationships, and the Company will be dependent on its Affiliated Practices for the success of any such relationships. Accordingly, the profitability of those payor relationships, as well as the performance of the individual dentists employed by the Affiliated Practices, will affect the Company's profitability. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Overview" and "Business--Service Agreements." The revenue of the Affiliated Practices (and, therefore, the success of the Company) is dependent on fees generated by the dentists employed by the Affiliated Practices. In connection with the Service Agreements, each dentist who owns a Founding Affiliated Practice will enter into a five-year employment agreement with the professional corporation or other entity with which that dentist is affiliated (and which is a party to a Service Agreement). The dentist employment agreements provide that the employee dentist will not compete with the Affiliated Practice during the term of the agreement and following the termination of the agreement for a term of two years in a specified geographical area. In most states, however, a covenant not to compete will be enforced only to the extent it is necessary to protect a legitimate business interest of the party seeking enforcement, does not unreasonably restrain the party against whom enforcement is sought and is not contrary to the public interest. This determination is made based on all the facts and circumstances of the specific case at the time enforcement is sought. Thus, there can be no assurance that a court will enforce such a covenant in a given situation. In addition, no judicial precedents have addressed whether a dental practice management company's interest under a management or service agreement will be viewed as the type of protectable business interest that would permit it 8 to enforce such a covenant or to require an affiliated practice to enforce such covenants against an employee dentist. A substantial reduction in the number of dentists employed by or associated with the Affiliated Practices could have a material adverse effect on the financial performance of the Company. Failure by the Affiliated Practices to employ a sufficient number of dentists (whether by renewals of existing employment agreements or otherwise) would have a material adverse effect on the Company. See "Business--Dentist Employment Agreements." DEPENDENCE ON MANAGEMENT INFORMATION SYSTEMS The success of the Company's business strategy will be dependent on, among other things, the successful implementation of new management information systems and other operating systems to permit the effective integration of the administrative operations of the Affiliated Practices into the Company's operations. For example, the Company will be required to integrate its financial information system with existing practice management systems at the Affiliated Practices, which may be different from those used by the Company. Any significant delay or increase in expense associated with the conversion and integration of management information systems used by Affiliated Practices could have a material adverse effect on the successful implementation of the Company's expansion strategy. In addition, the Company will have some systems that are decentralized, including cash collections. Accordingly, the Company will rely on local staff for certain functions, including transferring cash from the Affiliated Practices to the Company. See "Business--Management Information Systems." RISKS ASSOCIATED WITH EXPANSION STRATEGY GENERAL The success of the Company's expansion strategy will depend on a number of factors, including the Company's ability to (i) identify attractive and willing candidates to become Affiliated Practices in suitable markets and in suitable locations within those markets, (ii) affiliate with acceptable Affiliated Practices on favorable terms, (iii) adapt the Company's structure to comply with present or future legal requirements affecting the Company's arrangements with Affiliated Practices and comply with regulatory and licensing requirements applicable to dentists and facilities operated and services offered by dentists, (iv) obtain suitable financing to facilitate its expansion program and (v) expand the Company's infrastructure and management to accommodate expansion. A shortage of available dentists with the skills and experience sought by the Company would have a material adverse effect on the Company's expansion opportunities, and the Company anticipates facing substantial competition from other companies to establish affiliations with additional dental practices. In addition, there can be no assurance that the Company's expansion strategy will be successful, that modifications to the Company's strategy will not be required or that the Company will be able to manage effectively and enhance the profitability of additional Affiliated Practices. There can be no assurance that the Company will be able to achieve planned growth, that the assets of dental practices will continue to be available for acquisition by the Company, that the Company will be able to realize expected operating and economic efficiencies from pending or future affiliations or that future affiliations with additional Affiliated Practices will be profitable. See "--Competition," "--Immediate and Substantial Dilution and Absence of Dividends," "Management's Discussion and Analysis of Financial Condition and Results of Operations--Overview" and "Business--Business Strategy." POTENTIAL DILUTION OF EXISTING STOCKHOLDERS; NONCASH AMORTIZATION CHARGES Using shares of Common Stock as consideration for (or in order to provide financing for) future acquisitions could result in significant dilution to then-existing stockholders. In addition, future acquisitions accounted for as purchases may result in substantial annual noncash amortization charges for intangible assets in the Company's statements of operations. 9 NEED FOR ADDITIONAL FINANCING The Company's expansion program will require substantial capital resources. Capital is needed not only for the acquisition of the assets of additional Affiliated Practices, but also for the effective integration, operation and expansion of the Affiliated Practices. The Affiliated Practices may from time to time require capital for renovation and expansion and for the addition of equipment and technology. The Company believes the net proceeds from the Offering and cash flow from operations will be sufficient to meet the Company's anticipated expansion and working capital needs through the end of 1998. Thereafter, however, the Company may require additional capital from outside financing sources in order to continue its expansion program. There can be no assurance that the Company will be able to obtain additional funds when needed on satisfactory terms or at all. Any significant limitation on the Company's ability to obtain additional financing could have a material adverse effect on the Company. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." PROCEEDS OF OFFERING PAYABLE TO AFFILIATES In connection with the closing of the Affiliations, the Company will pay, out of the net proceeds from the Offering, an aggregate of approximately $6.7 million to promoters (including the dentist-owners of the Founding Affiliated Practices), officers and directors of the Company. Of this amount, approximately $6.4 million will be paid to the owners of the Founding Affiliated Practices, including approximately $216,326 to Ronnie L. Andress, D.D.S., $130,027 to James H. Clarke, Jr., D.D.S., $143,183 to Mack E. Greder, D.D.S., $144,017 to Roger Allen Kay, D.D.S., and $295,830 to Ronald M. Yaros, D.D.S. (each of whom will become a member of the Board of Directors of the Company (the "Board of Directors"). In addition, the Company will use $200,000 of the net proceeds from the Offering to purchase substantially all of the tangible and intangible assets of Pentegra, Ltd. and Napili, both of which entities are affiliates of Dr. Reed, the Company's Chairman of the Board. The Company will also use approximately (i) $2.8 million of the proceeds from the Offering in connection with the Repurchase and Redemption of PII's Class A Preferred and Class B Preferred, including approximately $37,500 to Dr. Reed, $37,500 to Gary S. Glatter, $37,500 to George M. Siegel, $334 to James L. Dunn, Jr., $667 to J. Michael Casas, $50,000 to Dr. Greder and $50,000 to Dr. Kay (each of whom is, or on closing of the Offering will be, a member of the Board of Directors or an officer of the Company), (ii) approximately $350,000 of the proceeds from the Offering in connection with the repayment of 9.5% promissory notes issued by the Company to fund certain offering and operating expenses, including approximately $25,000 to each of James M. McDonough, D.D.S. and Harold A. Pebbles, Jr., D.D.S. (both of whom are dentist-owners of Founding Affiliated Practices), and (iii) an aggregate of approximately $428,000 of the net proceeds of the Offering in connection with the purchase of certain accounts receivable from the Founding Affiliated Practices. See "Use of Proceeds" and "Certain Transactions--Organization of the Company." GOVERNMENT REGULATION Various federal and state laws regulate the dental services industry. Regulatory oversight includes, but is not limited to, considerations of corporate practice of dentistry, fee splitting, fraud and abuse, self-referral, false claims and insurance regulation. CORPORATE PRACTICE OF DENTISTRY AND FEE SPLITTING RESTRICTIONS The laws of many states, including all the states in which the Founding Affiliated Practices are located other than New Mexico and Wisconsin, prohibit business corporations such as the Company from engaging in the practice of dentistry or employing dentists to practice dentistry. The specific restrictions against the corporate practice of dentistry, as well as the interpretation of those restrictions by state regulatory authorities, vary from state to state. The restrictions are generally designed to prohibit a non-dental entity (such as the Company) from controlling the professional assets of a dental practice (such as patient records and payor contracts), employing dentists to practice dentistry (or, in certain states, employing dental 10 hygienists or dental assistants), or controlling the content of a dentist's advertising or professional practice. The laws of many states, including all the states in which the Founding Affiliated Practices are located other than Alaska, Maine, Massachusetts, New Mexico and Wisconsin, also prohibit dentists from sharing professional fees with non-dental entities. State dental boards do not generally interpret these prohibitions as preventing a non-dental entity from owning non-professional assets used by a dentist in a dental practice or providing management services to a dentist for a fee, provided certain conditions are met. The Company believes that its operations will not contravene any applicable restriction on the corporate practice of dentistry. There can be no assurance, however, that a review of the Company's business relationships by courts or regulatory authorities will not result in determinations that could prohibit or otherwise adversely affect the operations of the Company or that the regulatory environment will not change, requiring the Company to reorganize or restrict its existing or future operations. The laws regarding fee-splitting and the corporate practice of dentistry and their interpretation are enforced by regulatory authorities with broad discretion. There can be no assurance that the legality of the Company's business or its relationship with the Affiliated Practices will not be successfully challenged or that the enforceability of the provisions of any Service Agreement will not be limited. FRAUD AND ABUSE LAWS AND RESTRICTIONS ON REFERRALS AND SELF-REFERRALS Many states in which the Founding Affiliated Practices are located, including California, Florida, Maine, Maryland, Michigan, New York, Texas and Washington, have fraud and abuse laws that, in many cases, apply to referrals for items or services reimbursable by any insurer, not just by Medicare and Medicaid. A number of states, including many of the states in which the Founding Affiliated Practices are located, also impose significant penalties for submitting false claims for dental services. In addition, most of the states in which the Founding Affiliated Practices are located, including Alaska, Arizona, California, Florida, Louisiana, Maine, Maryland, Michigan, New York, Texas and Washington, have laws prohibiting paying or receiving any remuneration, direct or indirect, that is intended to induce referrals for health care items or services, including dental items and services. Many states in which the Founding Affiliated Practices are located either prohibit or require disclosure of self-referral arrangements and impose penalties for the violation of these laws. Many states, including Alaska, Florida and Maine, limit the ability of a person other than a licensed dentist to own or control equipment or offices used in a dental practice. Some of these states allow leasing of equipment and office space to a dental practice under a bona fide lease, if the equipment and office remain under the control of the dentist. ADVERTISING RESTRICTIONS AND LIMITATIONS ON DELEGATION Some states prohibit the advertising of dental services under a trade or corporate name. Some states, including Texas, require all advertisements to be in the name of the dentist. A number of states also regulate the content of advertisements of dental services and the use of promotional gift items. In addition, many states impose limits on the tasks that may be delegated by dentists to hygienists and dental assistants. These laws and their interpretations vary from state to state and are enforced by the courts and by regulatory authorities with broad discretion. INSURANCE REGULATION There are certain state insurance regulatory risks associated with the Company's anticipated role in negotiating and administering managed care contracts on behalf of the Affiliated Practices. The application of state insurance laws to third-party payor arrangements, other than fee-for-service arrangements, is an unsettled area of law with little guidance available. State insurance laws are subject to broad interpretation by regulators and, in some states, state insurance regulators may determine that the Company or the Affiliated Practices are engaged in the business of insurance because of the capitation features (or similar features under which an Affiliated Practice assumes financial risk) that may be contained in managed care contracts. In the event the Company or an Affiliated Practice is determined to 11 be engaged in the business of insurance, the Company or the Affiliated Practice could be required to either seek licensure as an insurance company or change the form of its relationships with the third-party payors. There can be no assurance that the Company's operations would not be adversely affected if the Company or any of the Affiliated Practices were to become subject to state insurance regulations. HEALTH CARE REFORM The United States Congress has considered various types of health care reform, including comprehensive revisions to the current health care system. It is uncertain what legislative proposals, if any, will be adopted in the future or what actions federal or state legislatures or third-party payors may take in anticipation of or in response to any health care reform proposals or legislation. There can be no assurance that applicable federal or state laws and regulations will not change or be interpreted in the future either to restrict or adversely affect the Company's relationships with dentists or the operation of Affiliated Practices. See "Business--Government Regulation." RISKS ASSOCIATED WITH COST CONTAINMENT INITIATIVES The health care industry, including the dental services market, is experiencing a trend toward cost containment, as third-party and government payors seek to impose lower reimbursement rates on providers. The Company believes this trend will continue and will increasingly affect dental services. This may result in a reduction in per-patient and per-procedure revenue from historical levels. There can be no assurance that any reductions in revenues and operating margins could be offset through cost reductions, increased volume, introduction of new procedures or otherwise. Accordingly, significant reductions in payments to Affiliated Practices or other changes in reimbursement by third-party payors for dental services performed by Affiliated Practices may have a material adverse effect on the Company. RISKS ASSOCIATED WITH MANAGED CARE CONTRACTS; CAPITATED FEE REVENUE The Company believes that managed care arrangements are becoming more prevalent in certain sectors of the dental services industry. As an increasing percentage of the population is covered by managed care organizations that provide dental coverage, the Company believes its future success may be dependent, in part, on its ability to assist the Affiliated Practices in negotiating contracts with dental health maintenance organizations, insurance companies, self insurance plans and other private third-party payors pursuant to which services will be provided on some type of fee-for-service or capitated basis by some of its Affiliated Practices. Under certain capitated contracts, the health care provider accepts a predetermined amount per patient per month as its sole payment in exchange for providing a specific schedule of services to enrollees. These contracts shift much of the risk of providing health care from the payor to the provider. To the extent that an Affiliated Practice enters into capitated managed care arrangements, it will be exposed to the risk that the cost of providing dental care required by these contracts exceeds the amount the Affiliated Practice receives for providing such care. If those costs exceed the revenues received for the service provided, the Affiliated Practice will remain responsible under its Service Agreement for reimbursing the Company for all of the costs associated with providing those services, even if no service fee is due thereunder. To the extent an Affiliated Practice enters into additional managed care contracts, it may achieve greater predictability of revenues but greater unpredictability of expenses due to the fluctuating costs of the services provided. There can be no assurance that the Company will be able to negotiate on behalf of the Affiliated Practices satisfactory arrangements on a capitated basis, regardless of the amount of risk sharing. In addition, to the extent that patients or enrollees covered by certain of these contracts require, in the aggregate, more frequent or extensive care than anticipated, operating margins may be reduced, or the revenues derived from these agreements may be insufficient to cover the costs of the services provided. As a result, Affiliated Practices would be at risk for additional costs which would reduce or eliminate any earnings for the Affiliated Practices under these contracts, with a corresponding reduction in or elimination of the service fee payable to the Company in those cases where the Service Agreements provide for percentage-based service fees. 12 CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS Following the completion of the Affiliations and the Offering, Dr. Reed, the Company's Chairman of the Board, the other executive officers and directors of the Company as a group and the owners of the Founding Affiliated Practices other than Dr. Reed will beneficially own approximately 2.3%, 16.0% and 40.2%, respectively, of the outstanding shares of Common Stock. These persons, if acting in concert, will be able to exercise control over the Company's affairs, elect the entire Board of Directors and (subject to Section 203 of the Delaware General Corporation Law ("DGCL")) control the outcome of any matter submitted to a vote of stockholders. POTENTIAL CONFLICTS OF INTEREST Each of Drs. Reed, Andress, Clarke, Greder, Kay and Yaros is the sole shareholder of a Founding Affiliated Practice and a professional corporation or association owned by them will be a party to a Service Agreement with the Company. In connection with the provision of management services by the Company to the Affiliated Practice owned by these dentists, there are potential conflicts of interest that may arise from time to time in connection with negotiating terms of working capital loans from the Company to that practice, if any, and certain other arrangements under the Service Agreement. BOARD COMPOSITION The Company's Bylaws provide that a majority of the members of the Board of Directors must be licensed dentists who are affiliated with Affiliated Practices. As a result, there will be a limited group of persons from which candidates to fill these board positions may be selected, and it is not anticipated that many of these persons will have had prior experience as board members of publicly held companies. In addition, each of Dr. Reed and the other board members who own an Affiliated Practice will be a party to a Service Agreement with the Company. In connection with the provision of management services by the Company to the Affiliated Practices owned by those dentists, potential conflicts may arise. See "Security Ownership of Certain Beneficial Owners and Management" and "Certain Transactions." DEPENDENCE ON KEY PERSONNEL The Company's future performance depends in significant part on the continued service of its senior management, including Dr. Reed and Gary S. Glatter, the President and Chief Executive Officer of the Company. There can be no assurance that these individuals will continue to work for the Company. Loss of services of those persons could have a material adverse effect on the Company. The success of the Company's growth strategy will also depend on the Company's ability to attract and retain additional high quality personnel. See "Business--Employees" and "Management." COMPETITION The Company anticipates facing substantial competition from other companies to establish affiliations with additional dental practices. The Company is aware of several publicly traded dental practice management companies that have operations in jurisdictions where one or more of the Founding Affiliated Practices conduct business (including Castle Dental Centers, Inc., Monarch Dental Corporation, Coast Dental Services, Inc., Gentle Dental Service Corp., Apple Orthodontix, Inc., OrthAlliance, Inc. and Orthodontic Centers of America, Inc.) and several companies pursuing similar strategies in other segments of the health care industry. Certain of these competitors have greater financial and other resources than the Company and have operations in areas where the Company may seek to expand in the future. Additional companies with similar objectives are expected to enter the Company's markets and compete with the Company. In addition, the business of providing dental services is highly competitive in each market in which the Company will operate. Each of the Founding Affiliated Practices faces local competition from other dentists, pedodontists (dentists specializing in the care of children's teeth) and other providers of specialty dental services (such as periodontists, orthodontists and oral surgeons) some of 13 whom have more established practices. There can be no assurance that the Company or the Affiliated Practices will be able to compete effectively with their respective competitors, that additional competitors will not enter their markets or that additional competition will not have a material adverse effect on the Company or the Affiliated Practices. See "Business--Competition." MALPRACTICE RISKS OF PROVIDING DENTAL SERVICES The Affiliated Practices provide dental services to the public and are exposed to the risk of professional liability and other claims. In recent years, dentists have become subject to an increasing number of lawsuits alleging malpractice and related legal theories. Some of these lawsuits may involve large claims and significant defense costs. Any suits involving the Company or dentists at the Affiliated Practices, if successful, could result in substantial damage awards to the claimants that may exceed the limits of any applicable insurance coverage. Although the Company will not control the practice of dentistry by the Affiliated Practices, it could be asserted that the Company should be held liable for malpractice of a dentist employed by an Affiliated Practice. Each Affiliated Practice has undertaken to comply with all applicable regulations and legal requirements, and the Company maintains liability insurance for itself. There can be no assurance, however, that a future claim or claims will not be successful or, if successful, will not exceed the limits of available insurance coverage or that such coverage will continue to be available at acceptable costs. Malpractice insurance, moreover, can be expensive and varies from state to state. Successful malpractice claims asserted against the Affiliated Practices (or their dentists) or the Company may have a material adverse effect on the Company. See "Business--Litigation and Insurance." POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON STOCK The market price of the Common Stock of the Company could be adversely affected by the sale of substantial amounts of the Common Stock in the public market following the Offering. The shares being sold in the Offering will be freely tradable unless acquired by affiliates of the Company. Concurrently with the closing of the Offering, the owners of the Founding Affiliated Practices will receive, in the aggregate, 2,622,269 shares of Common Stock as a portion of the consideration for the assets of their practices. Certain other stockholders of the Company will hold, in the aggregate, an additional 1,319,629 shares of Common Stock. Those shares are not being offered and sold pursuant to this Prospectus. All of those 3,941,898 shares were or are being issued in transactions that have not been registered under the Securities Act and, accordingly, such shares may not be sold except in transactions registered under the Securities Act or pursuant to an exemption from registration. In addition, the Company's executive officers, directors and current stockholders and the persons acquiring shares of Common Stock in connection with the Affiliations have agreed with the Company that they will not sell any of the shares of Common Stock owned by them immediately after the consummation of the Affiliations for a period of one year following the closing of the Offering, subject to their right to exercise certain piggy-back registration rights. After the expiration of that restricted period, all of those shares may be sold in accordance with Rule 144 under the Securities Act, subject to the applicable volume limitations, holding period and other requirements of Rule 144. The Company and its directors, executive officers and current stockholders have agreed not to offer or sell any shares of Common Stock for a period of 180 days (the "180-Day Lockup Period") following the date of this Prospectus without the prior written consent of Lehman Brothers Inc., except that the Company may, subject to certain conditions, issue Common Stock in connection with acquisitions and awards under the 1997 Stock Compensation Plan. Following completion of the Offering, the Company intends to register the issuance of an additional 1,500,000 shares of its Common Stock under the Securities Act subsequent to completion of the Offering for use by the Company as all or a portion of the consideration to be paid in future acquisitions. Those shares will generally be freely tradable by nonaffiliates after their issuance, unless the resale thereof is 14 contractually restricted, and resales of those shares during the 180-Day Lockup Period would require the prior written consent of Lehman Brothers Inc. The Company anticipates that, prior to the consummation of the Offering, the Company will have outstanding under the 1997 Stock Compensation Plan options to purchase approximately 671,667 shares of Common Stock. The Company intends to register the shares issuable upon exercise of options granted under the 1997 Stock Compensation Plan. See "Management--1997 Stock Compensation Plan" and "Shares Eligible for Future Sale." NO PRIOR MARKET; POSSIBLE VOLATILITY OF STOCK PRICE Prior to the Offering, there has been no public market for the Common Stock, and there can be no assurance that an active trading market will develop or, if a trading market does develop, that it will continue after the Offering. The initial public offering price of the Common Stock, which will be determined through negotiations between the Company and the Underwriters, may not be indicative of the price at which the Common Stock will trade after the Offering. See "Underwriting" for a description of the factors to be considered in determining the initial public offering price. The securities markets have, from time to time, experienced significant price and volume fluctuations that may be unrelated to the operating performance of particular companies. These fluctuations often substantially affect the market price of a company's common stock. The market prices for securities of medical and dental practice management companies have in the past been, and can be expected to be, particularly volatile. The market price of the Common Stock could be subject to significant fluctuations in response to numerous factors, including variations in financial results or announcements of material events by the Company or its competitors. Regulatory changes, developments in the health care industry or changes in general conditions in the economy or the financial markets could also adversely affect the market price of the Common Stock. CERTAIN ANTI-TAKEOVER PROVISIONS Certain provisions of the Company's Restated Certificate of Incorporation (the "Certificate of Incorporation") and Bylaws and of the DGCL could, together or separately, discourage potential acquisition proposals, delay or prevent a change in control of the Company or limit the price that certain investors might be willing to pay in the future for shares of the Common Stock. The Certificate of Incorporation provides for "blank check" preferred stock, which may be issued without stockholder approval and provides for a "staggered" Board of Directors. In addition, certain provisions of the Company's Bylaws restrict the right of the stockholders to call a special meeting of stockholders, to nominate directors, to submit proposals to be considered at stockholders' meetings and to adopt amendments to the Bylaws, and the Bylaws require that at least a majority of the members of the Board of Directors be licensed dentists who are affiliated with Affiliated Practices. The Company also is subject to Section 203 of the DGCL, which, subject to certain exceptions, prohibits a Delaware corporation from engaging in any of a broad range of business acquisitions with an "interested stockholder" for a period of three years following the date such stockholder became an interested stockholder. See "Description of Capital Stock." IMMEDIATE AND SUBSTANTIAL DILUTION; ABSENCE OF DIVIDENDS Purchasers of shares of Common Stock offered hereby will experience immediate and substantial dilution in the pro forma net tangible book value of their shares in the amount of $10.23 per share. Existing stockholders will receive an increase of $2.72 per share in the pro forma net tangible book value of their shares, which have a historical deficit in net tangible book value per share of $(0.95) as of September 30, 1997. See "Dilution." In the event the Company issues additional Common Stock in the future, including shares that may be issued in connection with future acquisitions, purchasers of Common Stock in the Offering may experience further dilution in the net tangible book value per share of Common Stock. The Company has never paid any cash dividends and does not anticipate paying cash dividends on its Common Stock in the foreseeable future. See "Dividend Policy." 15 THE COMPANY The Company has conducted no operations to date other than in connection with the Offering and the Affiliations. PII was formed in February 1997 and changed its name from "Pentegra Dental Group, Inc." to "Pentegra Investments, Inc." in July 1997. PII then organized Pentegra Dental Group, Inc. as its wholly owned subsidiary in July 1997 to, among other things, complete the Offering, the Affiliations, the Share Exchange, the Pentegra/Napili Transaction and the Repurchase and Redemption. The Company has entered into agreements to acquire substantially all the assets and assume certain liabilities of the Founding Affiliated Practices, Pentegra, Ltd. and Napili concurrently with the closing of the Offering. The Company's principal executive offices are located at 2999 N. 44th Street, Suite 650, Phoenix, Arizona 85018, and its telephone number is (602) 952-1200. 16 USE OF PROCEEDS The net proceeds to the Company from the sale of the shares of Common Stock offered hereby (after deducting the underwriting discounts and commissions and estimated offering expenses (excluding the offering expenses previously funded with proceeds from the issuance of promissory notes and capital stock of PII, including all the Class A Preferred and Class B Preferred involved in the Repurchase and Redemption)) are estimated to be approximately $22.0 million (approximately $24.8 million if the Underwriters' over-allotment option is exercised in full), assuming an initial public offering price of $10.00 per share (the midpoint of the estimated initial public offering price range). Of those net proceeds, (i) approximately $6.4 million will be used to pay the cash portion of the consideration for the Affiliations, (ii) $200,000 will be used to effect the Pentegra/Napili Transaction, (iii) approximately $2.8 million will be used in connection with the Redemption and Repurchase (approximately $1.5 million has been received by the Company as proceeds in connection with the 1997 issuances of the shares of Class A Preferred and Class B Preferred to be repurchased or redeemed), (iv) approximately $2.7 million will be used to repay certain indebtedness of the Company and the Founding Affiliated Practices (approximately $543,000 of which was incurred in 1997 by certain Founding Affiliated Practices to acquire dental equipment), (v) approximately $350,000 will be used to repay 9.5% promissory notes issued by the Company subsequent to September 30, 1997 to fund certain offering and operating expenses, which notes mature on the earlier of the first anniversary of the date of issuance or 30 days following consummation of the Offering, and (vi) approximately $428,000 will be used to purchase certain accounts receivable of the Founding Affiliated Practices. The remaining net proceeds will be used for general corporate purposes, which are expected to include future acquisitions and future capital expenditures. Pending such uses, the net proceeds will be invested in short-term, interest-bearing, investment-grade securities. The promoters (including the dentist-owners of the Founding Affiliated Practices), officers and directors of the Company will receive an aggregate of approximately $6.7 million out of the net proceeds of the Offering. Other than with respect to the Affiliations, the Company currently has no agreement or understanding with respect to any future affiliation. See "Risk Factors--Proceeds of Offering Payable to Affiliates" and "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." The consideration being paid by the Company in connection with each Affiliation was determined by negotiations between executive officers of the Company not affiliated with any Founding Affiliated Practice and a representative of that Founding Affiliated Practice. The Company used the same valuation method to negotiate the consideration being paid to each of the Founding Affiliated Practices, including the respective practices wholly owned by Drs. Reed, Andress, Clarke, Greder, Kay and Yaros, which method was based upon the Founding Affiliated Practice's gross revenue, net of certain operating expenses, and the Company's assessment of growth potential. See "Certain Transactions" for information concerning the identification of the owners of the Founding Affiliated Practices and the respective amounts of cash being paid to them out of the proceeds of the Offering and shares of Common Stock being issued to them in connection with the Affiliations. The indebtedness of the Founding Affiliated Practices to be repaid bears interest at an average rate of 8.0% and would otherwise mature at various dates through 2002. DIVIDEND POLICY It is the Company's current intention to retain earnings for the foreseeable future to support operations and finance expansion. The payment of any future dividends will be at the discretion of the Company's Board of Directors and will depend upon, among other things, the Company's earnings, financial condition, cash flow from operations, capital requirements, expansion plans, the income tax laws then in effect, the requirements of Delaware law and restrictions that may be imposed by the Company's future financing arrangements. 17 DILUTION The deficit in net tangible book value of the Company as of September 30, 1997 was approximately $(1.7) million, or $(0.95) per share of Common Stock, as determined by dividing the tangible net worth of the Company (tangible assets less total liabilities and the aggregate stated value of the Class A Preferred and Class B Preferred) by the number of shares of Common Stock outstanding. After giving effect to (i) the Affiliations and (ii) the sale by the Company of 2,500,000 shares of Common Stock offered at a price of $10.00 per share (the midpoint of the estimated initial public offering price range) and the application of the estimated net proceeds therefrom as set forth under "Use of Proceeds," the net pro forma tangible book value of the Company as of September 30, 1997 would have been approximately $11.4 million, or $1.77 per share of Common Stock. This represents an immediate increase in the net tangible book value of $2.72 per share to existing stockholders consisting of a decrease of $1.10 per share attributed to the assumption of net liabilities of the Founding Affiliated Practices and the related cash distribution of approximately $6.4 million to promoters (which is the aggregate cash consideration to be distributed in the Affiliations) and an increase of $3.82 per share relating to the Offering. The deficit in pro forma net tangible book value immediately after the Affiliations is $8.1 million, or $(2.05) per share. This is an immediate dilution to new investors purchasing Common Stock in the Offering of $10.23 per share. The following table illustrates the per share dilution to new investors purchasing Common Stock in the Offering: Assumed initial public offering price per share(1).............................. $ 12.00 Historical deficit in net tangible book value................................. $ (0.95) Decrease due to assumption of net liabilities and related cash distribution to promoters................................................................... (1.10) --------- Pro forma net tangible book value per share after the Affiliations............ (2.05) Increase due to the Offering.................................................. $ 3.82 --------- Pro forma net tangible book value per share after the Affiliations and Offering.................................................................... $ 1.77 --------- Dilution per share to initial public offering investors......................... $ 10.23 --------- ---------
- ------------ (1) Before deducting estimated underwriting discounts and expenses of the Offering payable by the Company. The following table sets forth, on a pro forma basis to give effect to the Affiliations as of September 30, 1997, the number of shares of Common Stock purchased from the Company, the total consideration to the Company and the average price per share paid to the Company by existing stockholders and the new investors purchasing shares from the Company in the Offering (before deducting underwriting discounts and commissions and estimated offering expenses):
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE --------------------- -------------------------- PRICE PER NUMBER PERCENT AMOUNT PERCENT SHARE --------- ---------- -------------- ---------- ------------ Existing stockholders.......................... 1,319,629 20.5% $ 726,000 3.7% $ 0.55 Stockholders receiving shares in connection with the Affiliations........................ 2,622,269 40.7% (6,417,796)(1) (33.2)% $ (2.45)(1) New investors.................................. 2,500,000 38.8% $ 25,000,000 129.5% $ 10.00 --------- ----- -------------- ----- Total...................................... 6,441,898 100.0% $ 19,308,204 100.0% --------- ----- -------------- ----- --------- ----- -------------- -----
- ------------ (1) Represents the cash distribution of approximately $6.4 million and the aggregate historical book value of the assets to be acquired, net of liabilities of the Founding Affiliated Practices to be assumed by the Company (a net amount of approximately $(51,000)), in the Affiliations. All of the calculations above exclude an aggregate of 671,667 shares of Common Stock issuable upon exercise of stock options anticipated to be outstanding on the date the Offering closes at an exercise price equal to the initial public offering price per share under the 1997 Stock Compensation Plan and 1,328,333 shares reserved for future issuance under the 1997 Stock Compensation Plan. See "Management--1997 Stock Compensation Plan." 18 CAPITALIZATION The following table sets forth the short-term debt and the capitalization of the Company at September 30, 1997 (a) on a historical basis, (b) on a pro forma basis, to give effect to the Affiliations and (c) on that pro forma basis, as adjusted to give effect to the Offering and the use of the estimated net proceeds therefrom as described under "Use of Proceeds." This table should be read in conjunction with the unaudited Pro Forma Balance Sheet of Pentegra and the notes thereto included elsewhere in this Prospectus.
AS OF SEPTEMBER 30, 1997 ---------------------------------------- HISTORICAL PRO FORMA AS ADJUSTED(1) ----------- ----------- -------------- (IN THOUSANDS) Short-term debt: Distribution liability(2)................................................ $ -- $ 6,567 $ -- Current portion of long-term debt........................................ -- 746 -- ----------- ----------- ------- Total short-term debt.................................................... $ -- $ 7,313 $ -- ----------- ----------- ------- ----------- ----------- ------- Long-term debt: Long-term debt, net of current portion................................... -- 2,003 -- Redeemable Preferred Stock................................................. 1,089 1,089 -- Stockholders' equity (deficit): Common Stock, 40,000,000 shares authorized; 1,756,667 shares issued and outstanding, 3,941,898 shares issued and outstanding, pro forma, and 6,441,898 shares issued and outstanding, as adjusted(1)................ 18 20 6 Additional paid-in capital(3)............................................ 708 (5,712) 13,552 Accumulated deficit...................................................... (750) (750) (2,000) ----------- ----------- ------- Total stockholders' equity............................................. (24) (6,442) 11,558 ----------- ----------- ------- Total capitalization................................................... $ 1,065 $ (3,350) $ 11,558 ----------- ----------- ------- ----------- ----------- -------
- --------- (1) Excludes 671,667 shares of Common Stock to become subject to option awards that have been authorized pursuant to the 1997 Stock Compensation Plan. See "Management--1997 Stock Compensation Plan." (2) Includes approximately $6,367,000 for the cash distribution to promoters in connection with the Affiliations (which is the aggregate cash consideration to be paid in the Affiliations) and $200,000 payable in connection with the Pentegra/Napili Transaction. (3) The $(6,420,000) effect of the Affiliations on additional paid-in capital is equal to the aggregate liabilities in excess of the aggregate historical book value of the assets to be acquired (a net amount of approximately $(51,000)), plus aggregate cash payments of approximately $6,367,000 to be made to promoters as part of the consideration for the Affiliations, plus the par value of the Common Stock to be issued in connection with the Affiliations. 19 SELECTED FINANCIAL DATA (IN THOUSANDS EXCEPT PER SHARE DATA) Upon completion of the Offering and pursuant to the Affiliations, the Company will acquire substantially all the tangible and intangible assets and assume certain liabilities of the Founding Affiliated Practices. Due to the fact that the Company has had no significant operations to date, no pro forma statement of operations has been included in this Prospectus. The nature and amount of costs to be incurred by the Company in connection with the management services it will provide to the Founding Affiliated Practices may differ from the costs historically incurred by the Founding Affiliated Practices. The selected historical financial data of the Company should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical financial statements and the notes thereto included in this Prospectus. The selected historical financial data of the Company as of September 30, 1997 and for the period from inception, February 21, 1997, through September 30, 1997, set forth below, have been derived from the audited financial statements of Pentegra Dental Group, Inc. included in this Prospectus. Except as indicated, the following information does not reflect the effects of the Offering, the Affiliations, the Share Exchange, the Pentegra/Napili Transaction and the Repurchase and Redemption. For certain information concerning the Affiliations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 4 of Notes to the Pentegra Dental Group, Inc. financial statements.
FOR THE PERIOD FROM INCEPTION (FEBRUARY 21, 1997) THROUGH SEPTEMBER 30, 1997 -------- (UNAUDITED) STATEMENT OF OPERATIONS DATA: Revenue.............................................. $ -- General and administrative expenses................ 411 Other expenses..................................... 339 -------- Total expenses................................. 750 -------- Net loss........................................... $ (750) -------- --------
SEPTEMBER 30, 1997 --------------------------- HISTORICAL AS ADJUSTED(1) ----------- -------------- BALANCE SHEET DATA: Cash and cash equivalents(2)........................................................... $ 354 $ 9,471 Working capital (deficit).............................................................. (652) 8,586 Total assets........................................................................... 2,071 12,997 Redeemable preferred stock............................................................. 1,089 -- Stockholders' equity (deficit)......................................................... (24) 11,558
- ------------ (1) As adjusted gives effect to (i) the Offering, (ii) the Affiliations, (iii) the repayment of certain indebtedness of Pentegra and the Founding Affiliated Practices, (iv) the Pentegra/Napili Transaction, (v) the Share Exchange and (vi) the Repurchase and Redemption, as if such transactions had occurred on September 30, 1997. See the Unaudited Pro Forma Balance Sheet of Pentegra and the notes thereto included in this Prospectus. (2) See "Use of Proceeds." 20 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING DISCUSSION AND ANALYSIS CONTAINS CERTAIN STATEMENTS OF A FORWARD-LOOKING NATURE RELATING TO FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF THE COMPANY. SUCH STATEMENTS ARE ONLY PREDICTIONS AND THE ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS," AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS. THE HISTORICAL RESULTS SET FORTH IN THIS DISCUSSION AND ANALYSIS ARE NOT INDICATIVE OF TRENDS WITH RESPECT TO ANY ACTUAL OR PROJECTED FUTURE FINANCIAL PERFORMANCE OF THE COMPANY. THIS DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE PRO FORMA BALANCE SHEET, THE FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO INCLUDED IN THIS PROSPECTUS. OVERVIEW Although the Company has conducted no significant operations to date, it will succeed to the business of Pentegra, Ltd. and Napili, which developed the Pentegra Dental Program. In connection with the Affiliations, the Company will acquire certain tangible and intangible assets and assume certain liabilities of, and enter into Service Agreements with, the Founding Affiliated Practices. Through those Service Agreements, the Company will be providing practice management services to the Founding Affiliated Practices in return for management service fees. The expenses incurred by the Company in fulfilling its obligations under the Service Agreements will be generally of the same nature as the operating costs and expenses that were otherwise incurred by the Founding Affiliated Practices, including salaries, wages and benefits of practice personnel (excluding dentists and certain other licensed dental care professionals), dental supplies and office supplies used in administering their practices and the office (general and administrative) expenses of the practices. In addition to the operating costs and expenses discussed above, the Company will be incurring personnel and administrative expenses in connection with establishing and maintaining a corporate office, which will provide management, administrative, marketing and development and acquisition services to Affiliated Practices. The Service Agreements with the professional corporations or associations to be formed by the dentist-owners of the Founding Affiliated Practices have initial terms of 40 years, subject to earlier termination under certain circumstances. Pursuant to those Service Agreements, the Company will become the exclusive manager and administrator of non-dental services relating to the operation of the Founding Affiliated Practices, and will, among other things, (i) administer the billing and collections for the Founding Affiliated Practices, (ii) provide the necessary clerical, accounting and other non-dental services to the Founding Affiliated Practices and (iii) provide facilities and equipment for the Founding Affiliated Practices. The service fees payable by the Founding Affiliated Practices to the Company under the Service Agreements are based on fair market value of the services to be provided. Generally, the service fees are computed based on (i) a percentage of revenues less operating expenses, (ii) a percentage of revenues not to exceed a percentage of revenues less operating expenses, (iii) a specific fixed service fee or (iv) some combination of these. See "--Planned Operations" and "Business--Service Agreements." The Company does not participate in the negotiation of dentist compensation. Under each Service Agreement, the Affiliated Practice will retain the decision-making power and responsibility for, among other things, (i) hiring, compensating and supervising dentists and other licensed dental professionals, (ii) ensuring that dentists have the required licenses, credentials, approvals and other certifications appropriate to the performance of their duties and (iii) complying with federal and state laws, regulations and ethical standards applicable to the practice of dentistry. Pursuant to the terms of the Service Agreements, the Affiliated Practices will continue to provide dental services and will be exclusively in control of all aspects of the practice of dentistry and the provision of dental services. The Company will not engage in the practice of dentistry. 21 As a result of the Affiliations and upon completion of the Offering, the dentist-owners of the Founding Affiliated Practices and certain officers and directors of the Company will beneficially own approximately 57.4% of the outstanding shares of Common Stock. See "Certain Transactions--Organization of the Company" and "Principal Stockholders." RESULTS OF OPERATIONS PENTEGRA AND PII Pentegra and PII have conducted no significant operations to date and will not conduct significant operations until the Affiliations, the Pentegra/Napili Transaction and the Offering are completed. The Company had no revenues and a net loss of $750,000 for the period from inception, February 21, 1997, through September 30, 1997. General and administrative expenses totalling approximately $750,000 were incurred during the period from inception through September 30, 1997. The Company has incurred and will continue to incur various legal, accounting, travel, personnel and marketing costs in connection with the Affiliations and the Offering. Of these expenses, $1,450,000 is being funded with proceeds from the issuances of the Common Stock, Class A Preferred and Class B Preferred in the second quarter of 1997, and $350,000 is being funded with proceeds from the issuance of $350,000 aggregate principal amount of 9.5% promissory notes of the Company to four separate lenders in October and November 1997. PLANNED OPERATIONS The Company intends to complete the Affiliations and the Pentegra/Napili Transaction concurrently with the closing of the Offering. Upon consummation of the Affiliations, the Company will enter into a Service Agreement with each Founding Affiliated Practice under which the Company will become the exclusive manager and administrator of non-dental services relating to the operation of the Founding Affiliated Practices. The following is a summary of the typical form of Service Agreement the Company will enter into with each Founding Affiliated Practice. The Company expects to enter into similar agreements with Affiliated Practices in the future. The actual terms of the Service Agreements may vary from the description below on a case-by-case basis, depending on negotiations with the individual Founding Affiliated Practices and the requirements of applicable laws and governmental regulations. Each Service Agreement is for an initial term of 40 years, with automatic extensions (unless specified notice is given) of five years. The Service Agreement may be terminated by either party if the other party (i) files a petition in bankruptcy (or other similar events occur) or (ii) defaults on the performance of a material duty or obligation, which default continues for a specified term after notice. In addition, the Service Agreement may be terminated by the Company (i) if the Founding Affiliated Practice or a dentist engages in conduct for which the dentist's license to practice dentistry is revoked or suspended or is the subject of any restrictions or limitations by any governmental authority to such an extent that he, she or it cannot engage in the practice of dentistry or (ii) upon a breach by the dentist of the employment agreement between the Founding Affiliated Practice and the dentist. The management service fees (the "Service Fees") payable to the Company by the Founding Affiliated Practices under the Service Agreements, together with operating and non-operating expenses of each Affiliated Practice to be paid to the Company pursuant to the Service Agreements, are payable monthly and consist of various combinations of the following: (i) "Standard Service Agreement", which provides for (a) a percentage (ranging from 30% to 40%) of the Affiliated Practice's revenues related to dental services less operating expenses associated with the operation of the Affiliated Practice or (b) a percentage (16%) of the Affiliated Practice's dental service revenues, not to exceed a percentage (35%) of the difference between those revenues and operating expenses associated with the operation of the Affiliated Practice; or (ii) "Alternative Service Agreement," which provides for the greater of (a) a percentage (not to exceed 35%) of the Affiliated Practice's revenues related to dental services less operating expenses associated with the operation of the Affiliated Practice or (b) a specified fixed Service 22 Fee. In addition, with respect to four of the Founding Affiliated Practices, the Service Fees are based on fixed fees that are subject to renegotiation on an annual basis. Service Fees payable to the Company under clause (i)(a) above are payable by 38 of the Founding Affiliated Practices, located in each state in which the Founding Affiliated Practices are located other than New York and California, and are calculated by subtracting the operating expenses of the Founding Affiliated Practice (including non-dental salaries, insurance, rent and other non-dentist costs) from the net revenues of the Founding Affiliated Practice and multiplying the resulting amount by 30%, 35% or 40%, depending on the terms of the particular Service Agreement. One Founding Affiliated Practice located in California will pay its Service Fee according to the formula set forth in clause (i)(b) above, equal to the greater of 16% of its net revenues or 35% of the difference between its net revenues and operating expenses. Service Fees to be received by the Company under clause (ii)(b) above are payable by seven of the Founding Affiliated Practices in Texas and will result in a minimum service fee being received by the Company. The annual fixed fees payable by the four Founding Affiliated Practices in New York are $66,009, $115,251, $83,579 and $140,127 and will be subject to renegotiation each year based on the fair value of the services to be received by those Founding Affiliated Practices from the Company. On a monthly basis, the Company will calculate the Service Fee due from each Founding Affiliated Practice pursuant to the terms of each Service Agreement. In addition, if the costs related to providing dental services pursuant to capitated managed care arrangements exceed the revenues received for those services, the Affiliated Practice will remain responsible for reimbursing the Company for all of the costs associated with providing those services, even if no Service Fee is due to the Company under its Service Agreement. Dentist compensation will be determined by the Affiliated Practices pursuant to employment arrangements between the Affiliated Practices and the individual dentists. The Company does not participate in the negotiation of dentist employment compensation. The Company will not engage in the practice of dentistry. To the extent that a Founding Affiliated Practice, with the assistance of the Company pursuant to its Service Agreement, increases its revenues and/ or decreases its operating expenses, the Service Fees payable to the Company may increase. The Service Fees for each Founding Affiliated Practice will be calculated individually and will not be based on the operations of any other Founding Affiliated Practice. It is anticipated that substantially all the Company's revenues will consist of Service Fees and the operating expenses that the Affiliated Practices will pay to the Company under the Service Agreements. Service Fees may be expected to vary proportionately with the level of dental services provided by Founding Affiliated Practices and future affiliations with additional Affiliated Practices. SERVICE FEE CALCULATION The following table categorizes by the type of Service Agreement, the historical 1996 patient revenues of the Founding Affiliated Practices and the historical 1996 operating expenses excluding depreciation and 23 dentists' salaries. It also demonstrates the calculation of the Service Fees under each type of Service Agreement (in thousands):
ALTERNATIVE SERVICE STANDARD AGREEMENT FIXED FEE SERVICE -------------------------- SERVICE AGREEMENT PERCENTAGE(C) FIXED AGREEMENT TOTAL ----------- --------------- --------- ----------- --------- Number of Founding Affiliated Practices..... 39 -- 7 4 50 ----------- ----- --------- ----------- --------- ----------- ----- --------- ----------- --------- Historical 1996 patient revenues of Founding Affiliated Practices....................... $ 29,233 -- $ 6,059 $ 2,599 $ 37,891 Historical 1996 operating expenses of Founding Affiliated Practices(a)........... 17,420 -- 4,269 1,393 23,082 ----------- ----- --------- ----------- --------- Historical 1996 operating income(a)....... $ 11,813 -- $ 1,790 $ 1,206 $ 14,809 --------- ----------- --------- --------- ----------- --------- Percentage of operating income under the Service Agreements(b)...................... 35% 35% -- -- -- ----------- ----- Percentage Service Fees based on operating income..................................... $ 4,135 -- -- -- $ 4,135 ----------- --------- ----------- --------- Fixed Service Fees under terms of the Service Agreements......................... $ 756 $ 405 $ 1,161 --------- ----------- --------- --------- ----------- ---------
- --------- (a) Under the terms of the Service Agreements, operating expenses and operating income exclude depreciation and the effects of dentists' salaries. (b) Represents the percentage that, under 37 of the Standard Service Agreements and all of the Alternative Service Agreements, will be applied to operating income to calculate percentage-based Service Fees. (c) All of the Company's Alternative Service Agreements would result in payment under the fixed fee provision of the contract if patient revenues and expenses were equal to historical revenues and expenses for the year ended December 31, 1996. Total fees payable to the Company under the Service Agreements will consist of the sum of (i) the operating expenses that the Affiliated Practices will pay the Company, (ii) the percentage-based Services Fees and (iii) the fixed Service Fees. LIQUIDITY AND CAPITAL RESOURCES The Company had cash of approximately $354,000 at September 30, 1997. In October and November 1997, the Company received an additional $350,000 through the issuance of $350,000 aggregate principal amount of 9.5% promissory notes to four lenders. In connection with the issuance of the 9.5% promissory notes, PII issued an aggregate of 20,000 shares of its common stock to certain of those lenders for cash consideration of $.01 per share and authorized the grant of options to acquire 25,000 shares of Common Stock at the initial public offering price. The Company anticipates receiving approximately $22.0 million, net of underwriters' commissions and other offering costs, as proceeds from the Offering. The Company will use the net proceeds of the Offering to pay (i) the costs of the Offering not previously funded from the proceeds of the issuance of capital stock and notes of the Company, (ii) the cash portion of the consideration for the Affiliations of approximately $6.4 million, (iii) the consideration for the Pentegra/ Napili Transaction of $200,000, (iv) approximately $2.8 million in connection with the Repurchase and Redemption, (v) approximately $2.7 million to retire certain indebtedness of the Founding Affiliated Practices and (vi) approximately $350,000 to repay the aggregate principal amount outstanding under the 24 Company's 9.5% promissory notes. The remaining net proceeds will be used for general corporate purposes, which are expected to include future acquisitions and capital expenditures. The cost of implementing the Company's management information systems is estimated to be approximately $550,000, including enhanced microcomputer and related hardware in certain dental practice offices. Approximately half of this amount has been paid with proceeds from the sale of Class A Preferred and Class B Preferred, with the remainder to be paid from the net proceeds of the Offering. Management believes the net proceeds of the Offering, combined with the Company's cash flows from operations, will be sufficient to fund planned capital expenditures and ongoing operations of the Company through the end of 1998. The Company is also seeking to establish a revolving bank credit facility and intends to register an additional 1,500,000 shares of Common Stock under the Securities Act following the Offering which, when combined with the Company's cash resources, will be used in the Company's expansion program. ACCOUNTING TREATMENT In accordance with Staff Accounting Bulletin No. 48, "Transfers of Nonmonetary Assets by Promoters or Shareholders" ("SAB 48"), the acquisition of the assets and assumption of certain liabilities pursuant to the Affiliations from certain promoters of the Company (the dentists who own the Founding Affiliated Practices) will be accounted for by the Company at the transferors' historical cost basis. The Common Stock being issued in the Affiliations will be recorded at the historical net book value of the net assets being acquired, as reflected on the books of the Founding Affiliated Practices. Cash consideration paid to the promoters in the Affiliations of approximately $6.4 million and the assumption of approximately $51,000 of net liabilities of the Founding Affiliated Practices will be treated for accounting purposes as a dividend to the promoters. See "Business--Summary of Terms of Affiliations" and "Certain Transactions--Organization of the Company." RECENT PRONOUNCEMENTS In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." SFAS No. 128 specifies the computation, presentation, and disclosure requirements of earnings per share and supersedes Accounting Principles Board Opinion No. 15, "Earnings Per Share." SFAS No. 128 requires a dual presentation of basic and diluted earnings per share. Basic earnings per share, which excludes the impact of common stock equivalents, replaces primary earnings per share. Diluted earnings per share, which utilizes the average market price per share as opposed to the greater of the average market price per share or ending market price per share when applying the treasury stock method in determining common stock equivalents, replaces fully diluted earnings per share. SFAS No. 128 is effective for both interim and annual periods ending after December 15, 1997. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information." SFAS No. 130 establishes standards for reporting and displaying comprehensive income and its components in a full set of general purpose financial statements. SFAS No. 131 establishes standards for reporting segment information by public enterprises in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports to shareholders. Both of these statements are effective for fiscal years beginning after December 15, 1997. The Company believes implementation of SFAS Nos. 130 and 131 will not have a material effect on its financial position, results of operations or cash flows. 25 BUSINESS OVERVIEW Pentegra Dental Group, Inc. was recently formed to provide management, administrative, development and other services to dental practices throughout the United States. The Company's approach to dental practice management, the Pentegra Dental Program, was developed by Dr. Omer K. Reed, the Chairman of the Board of the Company, and is designed to increase revenues and lower costs at Affiliated Practices while freeing the practicing dentists to focus on the delivery of high-quality care. The Company will earn management service fees under long-term service agreements with Affiliated Practices (the "Service Agreements"). In most cases, service fees payable to the Company under the Service Agreements represent a share of the Affiliated Practices' operating profits, thereby providing incentives for the Company and the Affiliated Practices to work together to maximize practice profitability. The Company will also seek to grow by acquiring and affiliating with additional dental practices. The Company has entered into definitive acquisition agreements and Service Agreements with 50 Founding Affiliated Practices, which include 77 dentists and 63 dental offices located in 18 states. These dentists have practiced an average of 21 years. Of these dentists, 68 are general dentists, one is a prosthodontist, five are periodontists, one is a pedodontist and two are oral surgeons. In addition, the Company will acquire from Dr. Reed the assets of a consulting firm, Pentegra, Ltd., which was founded in 1988, and a seminar company, Napili, which was founded in 1963. The clinical, administrative and marketing training developed and provided by these companies to practicing dentists and their teams are the foundation for the Pentegra Dental Program. After completion of the Offering, the Pentegra Dental Program will be available exclusively to Affiliated Practices. The Company believes it has several advantages that would lead dental practices to seek to affiliate with the Company: (i) the Company and the Founding Affiliated Practices focus on providing traditional fee-for-service dental care, which the Company believes is highly profitable and professionally rewarding for dentists; (ii) the Pentegra Dental Program offers proven techniques to increase practice profitability substantially; (iii) both the Company and the Affiliated Practices will have incentives to work together to maximize practice profitability; and (iv) affiliation with the Company will enable Affiliated Practices to benefit from professional management techniques, economies of scale in administrative and other functions, and enable affiliated dentists to dedicate more time and effort towards the growth of their practices. INDUSTRY The Health Care Finance Administration ("HCFA") estimates that in 1995, approximately $43 billion was spent in the United States on dental services. HCFA projects annual dental expenditures to increase at an average annual rate of six percent per year, reaching $79 billion in the year 2005. The Company believes there are several factors that will drive growth in dental expenditures in the United States, including (i) the aging of the population, which increases the demand for restorative and maintenance procedures (E.G., crowns, bridges and implants) that tend to be more profitable than routine procedures (E.G., cleanings and fillings); (ii) the increasing attention to dental health and wellness, with greater emphasis on personal appearance, which increases the demand for general dentistry services and, in particular, cosmetic dental procedures (E.G., porcelain bonding and bleaching), which also tend to be more profitable than routine procedures; and (iii) the increasing percentage of the population covered by some form of dental insurance, which, according to the National Center for Health Statistics, makes patients more likely to seek treatment from their dentist. Payments for dental services are made either directly by patients or by third-party payors. Third-party payors primarily consist of private insurance indemnity plans, preferred provider organizations ("PPOs") and dental health maintenance organizations and other managed care programs ("DHMOs"). Private indemnity insurance companies typically pay for a patient's dental care on a fee-for-service basis, while PPO plans pay on a discounted fee-for-service basis. DHMO plans typically pay on a per-person, per- 26 month basis regardless of the level of service provided to the patient. In the case of both PPOs and DHMOs, patients typically must pay on a fee-for-service basis for any services outside the limited range of dental procedures covered. According to the 1997 Mercer Consulting Group survey of Employer-Sponsored Health Plans, approximately 86% of the respondents in that survey reported that they offer their employees dental plans that pay for dental services on a fee-for-service basis, while approximately 22% of the plans surveyed are PPO and DHMO plans (I.E., discounted fee-for-service payments or capitated payments). According to HCFA, only approximately four percent of all payments for dental care are made under the Medicaid program (which provides limited coverage for indigent children), with no coverage being provided by the Medicare program. In a 1995 survey, the ADA reported that there were approximately 153,000 active dentists in the United States, approximately 88% of whom were practicing either alone or with only one other dentist. In recent years, dentists have begun to consolidate into affiliated groups and with practice management organizations. Dentists who affiliate with practice management companies gain several benefits, such as opportunities to achieve economies of scale, to implement cost management techniques and to gain access to capital for new equipment and other working capital needs. BUSINESS STRATEGY The Company's objective is to become a leader in providing dental practice management services. In order to achieve this objective, the Company's strategy includes the following elements: - FOCUS ON TRADITIONAL FEE-FOR-SERVICE DENTAL CARE. According to the 1997 Mercer Consulting Group Survey of Employer-Sponsored Health Plans, approximately 86% of the respondents in that survey reported that they offer their employees dental plans that pay for dental services on a fee-for-service basis. The Company believes that fee-for-service care is high-quality, highly profitable and professionally rewarding for dentists. - INCREASE PRODUCTIVITY AND PROFITABILITY OF AFFILIATED PRACTICES BY IMPLEMENTING THE PENTEGRA DENTAL PROGRAM. The Pentegra Dental Program involves implementing techniques designed to increase revenues and lower costs, as well as methods to make the dentist and his or her practice team more efficient in the delivery of dental care. - LOWER OPERATING COSTS BY ACHIEVING ECONOMIES OF SCALE. The Company believes that, as a result of its size and resources, it will be able to provide Affiliated Practices with certain management functions at lower cost than if the Affiliated Practices were to perform the services by themselves. - FREE THE DENTIST TO FOCUS MORE TIME ON THE PRACTICE OF DENTISTRY. The Company will relieve practicing dentists of administrative tasks. The Company believes its management and administrative support will substantially reduce the amount of time affiliated dentists are required to spend on administrative matters and enable them to dedicate more time and effort toward the growth of their professional practices. - GROW THROUGH ACQUISITIONS AND AFFILIATIONS OF ADDITIONAL DENTAL PRACTICES. The Company will generally seek to affiliate with practices that have high potential for future growth, particularly through implementation of the Pentegra Dental Program, an established reputation for high-quality care and a strategic fit either in an existing market or as an entry into a new market. SERVICES AND OPERATIONS THE PENTEGRA DENTAL PROGRAM The Company intends to implement the Pentegra Dental Program at each Affiliated Practice. The Pentegra Dental Program was developed by Dr. Reed through Pentegra, Ltd. and Napili. Napili was founded in 1963 and has conducted technical and management seminars for over 15,000 practicing 27 dentists, including many who have attended these seminars more than once. As a result of demand by attendees of Napili seminars, Dr. Reed established Pentegra, Ltd. in 1988 to provide hands-on, on-site training and services to small groups of dentists. Shortly after completion of the Offering, Pentegra, Ltd. and Napili will no longer operate independently and their services will be available exclusively to Affiliated Practices. The Company focuses on traditional fee-for-service practices, which generate revenue by providing care to their established patient bases and typically grow through patient referrals. The Company believes that the average dentist has the skills necessary to diagnose and provide appropriate care to patients, but many of them have not developed the skills needed to obtain patient acceptances of, and commitments to, the treatment plans. As a result, a significant amount of recommended care may not be completed, with correspondingly lower revenues to the dentists. The Pentegra Dental Program is based on a cooperative approach that emphasizes patient wellness and involves the dentist and his or her patient mutually agreeing on a program to achieve and maintain optimal oral health. The Company will provide seminars and on-site training and support to assist affiliated dentists (who will control the practice of dentistry at Affiliated Practices) and their teams to communicate effectively with each patient regarding the type and value of care needed, obtain the patient's commitment to a treatment plan and then implement the agreed-upon treatment plan. An initial on-site consulting and training session will be provided to Affiliated Practices lasting from one to three days, with subsequent sessions provided as necessary. At each initial session, the Company will perform an analysis that includes on-site observation of the dental practice, monitoring of the clinical staff and patient flow, as well as a review of the charting and record documentation of the care provided. The Company and the Affiliated Practices will monitor the patients' treatment plans by using active recall systems to ensure that scheduled treatments are actually performed. The Pentegra Dental Program stresses quality of care and personal attention, both of which the Company believes are highly valued by patients and help achieve treatment plan acceptance. The Company intends to develop and maintain a statistical database for each Affiliated Practice to define and measure the standard of care and assure that the desired standards are being achieved. The Pentegra Dental Program also analyzes and rationalizes fee structures to increase profitability. The Company believes that typical fee structures do not accurately reflect all direct and indirect costs of various procedures. In order to address this, the Company will use time-related cost allocation models to recommend fee structures for Affiliated Practices that are designed to reflect the true cost of procedures and, hence, increase profitability. In addition, the Pentegra Dental Program focuses on increasing the productivity of the dentist and his or her team. The Company will seek to increase hygienic use and production at the Affiliated Practices. A number of dental services can be provided by hygiene teams with only limited involvement by the dentist, thereby enabling dentists to use their extra time on higher margin procedures requiring greater expertise and skill. The Company will also monitor the Affiliated Practices' patient scheduling and time spent with patients, and will provide office design services, in order to increase utilization of existing dental equipment and personnel. MANAGEMENT INFORMATION SYSTEMS The Company will utilize an integrated server-based information system to track important operational and financial data related to each Affiliated Practice's performance. The Company's management information system will enable the Company to collect from each Affiliated Practice, on a daily basis, data on patients seen, number and type of procedures performed, billing and collections, and other data needed for financial reporting and analysis. The Company will then compile and analyze this data in order to promote efficiency and assure high quality care at Affiliated Practices, as well as maintain necessary financial controls. The Company's management information system will also enable the Company to 28 centralize certain functions, such as purchasing, accounts payable and payroll processing, and achieve economies of scale. The centralized data repository of the Company's management information system has been completed. The Company is currently in the process of refining and testing the interfacing of its management information system with beta sites at selected Founding Affiliated Practices. The Company has successfully completed testing to ensure access to the Company's data repository via the internet at the beta sites, but has not yet completed testing of the entry and retrieval of statistical data into the data repository from the beta sites. The Company expects its integrated system to be operational at all of the Founding Affiliated Practices at the closing of the Offering, and will be installed promptly at all future Affiliated Practices as they affiliate with the Company. Any significant delay or increase in expense associated with the conversion and integration of management information systems used by Affiliated Practices could have a material adverse effect on the successful implementation of the Company's expansion strategy. In addition, the Company will have some systems that will remain decentralized for at least some time, such as cash collections. Accordingly, the Company will rely on local staff for certain functions, including transferring cash from the Affiliated Practices to the Company. OTHER PRACTICE MANAGEMENT SERVICES The Company will provide other practice management services to the Affiliated Practices, including staffing, general business and professional dental education and training to affiliated dentists, dental hygenists and office staff, employee benefits administration, advertising and other marketing support and, where permitted by applicable law, dentist recruiting. This management and administrative support should substantially reduce the amount of time affiliated dentists are required to spend on administrative matters and enable them to dedicate more time and effort toward the growth of their professional practices. In addition, the Company expects to be able to negotiate, on behalf of Affiliated Practices, discounts on, among other things, dental and office supplies, health and malpractice insurance and equipment. The Company does not currently intend to enter into any agreements with third-party payors. In certain markets, the Company may assist Affiliated Practices in securing reimbursement contracts from third-party payors. In those situations, the Company's role will be to negotiate and administer the contracts on behalf of the Affiliated Practices. 29 LOCATIONS Upon consummation of the Affiliations, the Company will provide management services to the Founding Affiliated Practices, with offices in the following states:
NUMBER OF ------------------------------- STATE OFFICES DENTISTS CITIES - ------------------------------------------------------------------- --------- --------- --------- Alaska............................................................. 1 1 1 Arizona............................................................ 6 7 4 California......................................................... 1 1 1 Colorado........................................................... 4 6 4 Florida............................................................ 3 3 2 Louisiana.......................................................... 1 1 1 Maine.............................................................. 1 1 1 Maryland........................................................... 1 1 1 Massachusetts...................................................... 1 2 1 Michigan........................................................... 1 1 1 Nebraska........................................................... 2 2 1 New Mexico......................................................... 1 2 1 New York........................................................... 4 4 3 North Dakota....................................................... 1 1 1 Oregon............................................................. 1 1 1 Texas.............................................................. 31 40 12 Washington......................................................... 2 2 2 Wisconsin.......................................................... 1 1 1 --------- --------- --------- Totals........................................................... 63 77 39 --------- --------- --------- --------- --------- ---------
All office facilities are leased, in some cases from the owner of the Affiliated Practice using the facility. Pursuant to its Service Agreements, the Company will provide all the office facilities (which it intends to lease), dental equipment and furnishings to the Affiliated Practices. SUMMARY OF TERMS OF AFFILIATIONS The aggregate consideration that will be paid by Pentegra to the promoters consists of (i) approximately $6.4 million in cash and (ii) shares of Common Stock having a value of approximately $26.2 million, based on the initial public offering price (2,622,269 shares of Common Stock, based on an assumed initial public offering price of $10.00 per share). The number of shares to be issued in connection with the Affiliations will decrease if the initial public offering price is higher, and will increase if the initial public offering price is lower, than $10.00 per share. For example, an aggregate of 2,383,881 shares of Common Stock would be issued to the dentist-owners of the Founding Affiliated Practices (all of whom are promoters of the Company) if that price is $11.00 per share, while an aggregate of 2,913,631 shares of Common Stock would be issued to those persons if that price is $9.00 per share. The Company will also assume certain indebtedness of the Founding Affiliated Practices of approximately $2.7 million. Pentegra will acquire substantially all the assets necessary to operate the business of each of the Founding Affiliated Practices, except as limited by applicable restrictions on the corporate practice of dentistry. See Note 4 of Notes to the Pentegra Dental Group, Inc. Financial Statements and "--Government Regulation." The assets to be acquired include furniture, fixtures, computer equipment, dental chairs, lights, autoclaves, mixers, vacuum and suction systems, cabinets, hand instruments and hand pieces of each Founding Affiliated Practice. Pentegra will also acquire the intangible assets of each Founding Affiliated Practice and will employ the non-professional staff of each Founding Affiliated Practice. Prior to consummation of the Offering, each dentist-owner who owns a Founding Affiliated Practice will form a new professional corporation or association that will be a party to a Service Agreement, and the Company will own no interest in those professional corporations or associations. In the event of a breach of the Service Agreement by an Affiliated Practice, the Company will have the right to designate a dentist to purchase the ownership interests of the applicable professional corporation or association. 30 The consideration being paid by Pentegra for each Founding Affiliated Practice was determined by negotiations between executive officers of Pentegra not affiliated with any Founding Affiliated Practice and a representative of that Founding Affiliated Practice. Pentegra used valuation methods to negotiate the consideration being paid to each of the Founding Affiliated Practices, including the respective practices wholly owned by Drs. Reed, Andress, Clarke, Greder, Kay and Yaros, which methods were based upon the Founding Affiliated Practice's gross revenue, net of certain operating expenses, and the Company's assessment of growth potential. The closing of each Affiliation is subject to customary conditions. These conditions include, among others, the accuracy, on the closing date of the Affiliations, of the representations and warranties made by the Founding Affiliated Practices and their stockholders and by the Company; the performance of each of their respective covenants included in the agreements relating to the Affiliations; and the absence of any material adverse change in the results of operations, financial condition or business of each Founding Affiliated Practice. Any Founding Affiliated Practice's acquisition agreement may be terminated, under certain circumstances, prior to the closing of the Offering: (i) by the mutual consent of Pentegra and the Founding Affiliated Practice; (ii) if the Offering and the acquisition of that Founding Affiliated Practice are not closed by March 31, 1998; or (iii) by the Founding Affiliated Practice or Pentegra if a material breach or default is made by the other party in the observance or in the due and timely performance of any of the covenants, agreements or conditions contained in the acquisition agreement. SERVICE AGREEMENTS Upon consummation of the Affiliations, the Company will enter into a Service Agreement with each Founding Affiliated Practice under which the Company will become the exclusive manager and administrator of non-dental services relating to the operation of the Founding Affiliated Practices. The following is intended to be a brief summary of the typical form of Service Agreement the Company will enter into with each Founding Affiliated Practice. The Company expects to enter into similar agreements with Affiliated Practices in the future. The actual terms of the various Service Agreements vary from the description below on a case-by-case basis, depending on negotiations with the individual Founding Affiliated Practices and the requirements of applicable law and governmental regulations. The Service Fees payable to the Company by the professional corporations or associations to be formed by the dentist-owners of the Founding Affiliated Practices under the Service Agreements are based on the fair market value, as determined in arm's-length negotiations, of the nature and amount of services to be provided. Those Affiliated Practices that have revenues greater than the average amount of revenues generated by the Affiliated Practices will typically require more administrative and other services from the Company than those Affiliated Practices with lower than average revenues. Such fees, together with reimbursement for operating and non-operating expenses of each Affiliated Practice to be paid by the Company pursuant to the Service Agreements, are payable monthly and consist of various combinations of the following: (i) a percentage (ranging from 30% to 40%) of the Affiliated Practice's revenues related to dental services less operating expenses associated with the operation of the Affiliated Practice; (ii) a percentage (16%) of the Affiliated Practice's dental service revenues, not to exceed a percentage (35%) of the difference between those revenues and operating expenses associated with the operation of the Affililated Practice; or (iii) the greater of (a) a percentage (not to exceed 35%) of the Affiliated Practice's revenues related to dental services less operating expenses associated with the operation of the Affiliated Practice or (b) a specified fixed fee. In addition, with respect to four of the Founding Affiliated Practices, the Service Fees are based on fixed fees that are subject to renegotiation on an annual basis. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations--Planned Operations." Pursuant to each Service Agreement, the Company will, among other things, (i) act as the exclusive manager and administrator of non-dental services relating to the operation of the Founding Affiliated 31 Practice, subject to certain matters reserved to the Founding Affiliated Practice, (ii) administer the billing of patients, insurance companies and other third-party payors and collect on behalf of the Founding Affiliated Practice the fees for professional dental and other services and products rendered or sold by the Founding Affiliated Practice, (iii) provide, as necessary, clerical, accounting, payroll, legal, bookkeeping and computer services and personnel, information management, printing, postage and duplication services and transcribing services, (iv) supervise and maintain custody of substantially all files and records (other than patient records if prohibited by applicable law), (v) provide facilities, equipment and furnishings for the Founding Affiliated Practice, (vi) order and purchase inventory and supplies as reasonably requested by the Founding Affiliated Practice and (vii) implement, in consultation with the Founding Affiliated Practice, public relations or advertising programs. Pursuant to each Service Agreement, the respective Founding Affiliated Practice retains the decision-making power and responsibility for, among other things, (i) hiring, compensating and supervising dentist-employees and other licensed dental professionals, (ii) ensuring that dentists have the required licenses, credentials, approvals and other certifications appropriate for the performance of their duties and (iii) complying with federal and state laws, regulations and ethical standards applicable to the practice of dentistry. In addition, the Founding Affiliated Practice will be exclusively in control of all aspects of the practice of dentistry and the provision of dental services. Each Service Agreement is for an initial term of 40 years, with automatic extensions (unless specified notice is given) of five years. The Service Agreement may be terminated by either party if the other party (i) files a petition in bankruptcy or other similar events occur or (ii) defaults on the performance of a material duty or obligation, which default continues for a specified term after notice. In addition, the Service Agreement may be terminated by the Company (i) if the Founding Affiliated Practice or a dental employee engages in conduct for which the dental employee's license to practice dentistry is revoked or suspended or is the subject of any restrictions or limitations by any governmental authority to such an extent that he, she or it cannot engage in the practice of dentistry or (ii) upon a breach by the dentist of the employment agreement between the Founding Affiliated Practice and the dentist. The Service Agreement requires the Founding Affiliated Practice to enforce the employment agreements between the Founding Affiliated Practice and the dentists associated with the Founding Affiliated Practice (the "Dentist Employment Agreements"). If the Founding Affiliated Practice does not enforce such employment agreement, the Company may, at its option, require the Founding Affiliated Practice to either assign (i) such employment agreement or (ii) the rights to enforce the covenant not to compete set forth therein to the Company or its designee. The Founding Affiliated Practice is responsible for obtaining professional liability insurance for the employees of the Founding Affiliated Practice and the Company is responsible for obtaining general liability and property insurance for the Founding Affiliated Practice. Upon termination of a Service Agreement, the Founding Affiliated Practice has the option to purchase and assume, and the Company has the option to require the Founding Affiliated Practice to purchase and assume, the assets and liabilities related to the Founding Affiliated Practice at the fair market value thereof, except in certain circumstances where the Founding Affiliated Practice or the Company, as applicable, was in breach of the Service Agreement. DENTIST AGREEMENT Each dentist who has an ownership interest in a Founding Affiliated Practice will enter into a dentist agreement, which provides the Company such dentist's guarantee (for the initial five years and for so long thereafter as he or she owns any interest in the Founding Affiliated Practice) of the Founding Affiliated Practice's obligations under the applicable Service Agreement. In addition, such agreement provides that the dentist may not sell his or her ownership interest during the dentist's five-year employment term without the Company's prior written consent. In the event of a default under the Service Agreement by the Founding Affiliated Practice, the dentist agreement provides that the Company may, at its option, require 32 the Founding Affiliated Practice to convey its patient records and the capital stock of the Founding Affiliated Practice to the Company's authorized designee, who, in any such case, the Company anticipates will be a dentist affiliated with an Affiliated Practice. DENTIST EMPLOYMENT AGREEMENTS Upon consummation of the Affiliations, each Founding Affiliated Practice will be a party to a Dentist Employment Agreement with each dentist owner, including the dentist who owns such Founding Affiliated Practice. The Dentist Employment Agreements with dentists who will receive cash or Common Stock in the Affiliations are for an initial term of five years and continue thereafter on a year-to-year basis until terminated under the terms of the agreements. The Dentist Employment Agreements provide that the employee dentist will not compete with the Affiliated Practice during the term of the agreement and following the termination of the agreement for a term of two years in a specified geographical area. If employment of a dentist is terminated during the initial five-year term without the consent of Pentegra for any reason other than the dentist's death or disability or the occurrence of certain events outside the dentist's control, an event of default will occur under the Service Agreement. In certain jurisdictions a covenant not to compete may not be enforceable under certain circumstances. See "Risk Factors-- Reliance on Affiliated Practices and Dentists." COMPETITION The Company anticipates facing substantial competition from other companies to establish affiliations with additional dental practices. The Company is aware of several publicly traded dental practice management companies that have operations in jurisdictions where one or more Founding Affiliated Practices conduct business (including Castle Dental Centers, Inc., Monarch Dental Corporation, Coast Dental Services, Inc., Gentle Dental Service Corp., Apple Orthodontix, Inc., OrthAlliance, Inc. and Orthodontic Centers of America, Inc.) and several companies pursuing similar strategies in other segments of the health care industry. Certain of these competitors have greater financial and other resources than the Company and have operations in areas where the Company may seek to expand in the future. Additional companies with similar objectives are expected to enter the Company's markets and compete with the Company. In addition, the business of providing dental services is highly competitive in each market in which the Company will operate. Each of the Founding Affiliated Practices faces local competition from other dentists, pedodontists and other providers of specialty dental services (such as periodontists, orthodontists and oral surgeons), some of whom have more established practices. There can be no assurance that the Company or the Affiliated Practices will be able to compete effectively with their respective competitors, that additional competitors will not enter their markets or that additional competition will not have a material adverse effect on the Company or the Affiliated Practices. EMPLOYEES As of December 1, 1997, the Company employed three persons. Upon consummation of the Affiliations, the Company expects that it will have approximately 390 employees, of which approximately 15 will be employed at the Company's headquarters in Phoenix, Arizona or at the Company's regional office in Houston, Texas, and approximately 375 will be employed at the locations of the Founding Affiliated Practices. None of the Company's employees is, or upon consummation of the Affiliations will be, represented by collective bargaining agreements. The Company considers its employee relations to be good. LITIGATION AND INSURANCE The Affiliated Practices provide dental services to the public and are exposed to the risk of professional liability and other claims. In recent years, dentists have become subject to an increasing number of lawsuits alleging malpractice and related legal theories. Some of these lawsuits involve large claims and significant defense costs. Any suits or claims involving the Company or dentists at the Affiliated Practices, if successful, could result in substantial damage awards to the claimants that may exceed the limits of any applicable insurance coverage. Although the Company does not control the practice of 33 dentistry by the Affiliated Practices, it could be asserted that the Company should be held liable for malpractice of a dentist employed by an Affiliated Practice. Each Affiliated Practice has undertaken to comply with all applicable regulations and legal requirements, and the Company maintains liability insurance for itself. There can be no assurance, however, that a future claim or claims will not be successful or, if successful, will not exceed the limits of available insurance coverage or that such coverage will continue to be available at acceptable costs. The Company is currently not a party to any claims, suits or complaints. The Company may become subject to certain pending claims (each of which is an ordinary routine proceeding incidental to the business of the applicable Founding Affiliated Practice) as the result of successor liability in connection with the Affiliations; however, it is management's opinion that the ultimate resolution of those claims will not have a material adverse effect on the financial position, operating results or cash flows of the Company. The Founding Affiliated Practices have maintained professional liability insurance coverage, generally on a claims-made basis. Such insurance provides coverage for claims asserted when the policy is in effect regardless of when the events that caused the claim occurred. The Company intends to acquire similar coverage after the closing of the Affiliations, since the Company, as a result of the Affiliations, will in some cases succeed to the liabilities of the Founding Affiliated Practices. Therefore, claims may be asserted against the Company after the closing of Affiliations for events that occurred prior to such closing. GOVERNMENT REGULATION The dental services industry is regulated extensively at both the state and federal levels. Regulatory oversight includes, but is not limited to, considerations of fee-splitting, corporate practice of dentistry and state insurance regulation. CORPORATE PRACTICE OF DENTISTRY AND FEE-SPLITTING RESTRICTIONS The laws of many states, including all of the states in which the Founding Affiliated Practices are located other than New Mexico and Wisconsin, prohibit business corporations such as the Company from engaging in the practice of dentistry or employing dentists to practice dentistry. The specific restrictions against the corporate practice of dentistry, as well as the interpretation of those restrictions by state regulatory authorities, vary from state to state. The restrictions are generally designed to prohibit a non-dental entity (such as the Company) from controlling the professional assets of a dental practice (such as patient records and payor contracts), employing dentists to practice dentistry (or, in certain states, employing dental hygienists or dental assistants) or controlling the content of a dentist's advertising or professional practice. The laws of many states, including all of the states in which the Founding Affiliated Practices are located other than Alaska, Maine, Massachusetts, New Mexico and Wisconsin, also prohibit dentists from sharing professional fees with non-dental entities. State dental boards do not generally interpret these prohibitions as preventing a non-dental entity from owning non-professional assets used by a dentist in a dental practice or providing management services to a dentist for a fee, provided certain conditions are met. The Company believes that its operations will not contravene any restriction on the corporate practice of dentistry. There can be no assurance, however, that a review of the Company's business relationships by courts or regulatory authorities will not result in determinations that could prohibit or otherwise adversely affect the operations of the Company or that the regulatory environment will not change, requiring the Company to reorganize or restrict its existing or future operations. The laws regarding fee-splitting and the corporate practice of dentistry and their interpretation are enforced by regulatory authorities with broad discretion. There can be no assurance that the legality of the Company's business or its relationship with the Affiliated Practices will not be successfully challenged or that the enforceability of the provisions of any Service Agreement will not be limited. The dentists associated with the Affiliated Practices must possess a license from the applicable state Board of Dental Examiners and a permit from the U.S. Drug Enforcement Agency. 34 FRAUD AND ABUSE LAWS AND RESTRICTIONS ON REFERRALS AND SELF-REFERRALS Many states in which the Founding Affiliated Practices are located, including California, Florida, Maine, Maryland, Michigan, New York, Texas and Washington, have fraud and abuse laws that, in many cases, apply to referrals for items or services reimbursable by any insurer, not just by Medicare and Medicaid. A number of states, including many of the states in which the Founding Affiliated Practices are located, also impose significant penalties for submitting false claims for dental services. In addition, most states in which the Founding Affiliated Practices are located, including Alaska, Arizona, California, Florida, Louisiana, Maine, Maryland, Michigan, New York, Texas and Washington, have laws prohibiting paying or receiving any remuneration, direct or indirect, that is intended to induce referrals for health care items or services, including dental items and services. Many states in which the Founding Affiliated Practices are located either prohibit or require disclosure of self-referral arrangements and impose penalties for the violation of these laws. Many states, including Alaska, Florida and Maine, limit the ability of a person other than a licensed dentist to own or control equipment or offices used in a dental practice. Some of these states allow leasing of equipment and office space to a dental practice under a bona fide lease, if the equipment and office remain under the control of the dentist. The Service Agreements that will be entered into by the Company with respect to Affiliated Practices in Alaska, Florida and Maine will provide that equipment and offices owned or leased by the Company and used at an Affiliated Practice will remain under the exclusive control of the dentists employed by that Affiliated Practice. ADVERTISING RESTRICTIONS AND LIMITATIONS ON DELEGATION Some states prohibit the advertising of dental services under a trade or corporate name. Some states, including Texas, require all advertisements to be in the name of the dentist. A number of states also regulate the content of advertisements of dental services and the use of promotional gift items. In addition, many states impose limits on the tasks that may be delegated by dentists to hygienists and dental assistants. These laws and their interpretations vary from state to state and are enforced by the courts and by regulatory authorities with broad discretion. INSURANCE REGULATION There are certain state insurance regulatory risks associated with the Company's anticipated role in negotiating and administering managed care contracts on behalf of the Affiliated Practices. The application of state insurance laws to third-party payor arrangements, other than fee-for-service arrangements, is an unsettled area of law with little guidance available. State insurance laws are subject to broad interpretation by regulators and, in some states, state insurance regulators may determine that the Company or the Affiliated Practices are engaged in the business of insurance because of the capitation features (or similar features under which an Affiliated Practice assumes financial risk) that may be contained in managed care contracts. In the event that the Company or an Affiliated Practice is determined to be engaged in the business of insurance, the Company or the Affiliated Practice could be required to either seek licensure as an insurance company or change the form of its relationships with the third-party payors. There can be no assurance that the Company's operations would not be adversely affected if the Company or any of the Affiliated Practices were to become subject to state insurance regulations. HEALTH CARE REFORM The United States Congress has considered various types of health care reform, including comprehensive revisions to the current health care system. It is uncertain what legislative proposals, if any, will be adopted in the future or what actions federal or state legislatures or third-party payors may take in anticipation of or in response to any health care reform proposals or legislation. There can be no assurance that applicable federal or state laws and regulations will not change or be interpreted in the future either to restrict or adversely affect the Company's relationships with dentists or the operation of Affiliated Practices. 35 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS As required by the Company's Bylaws, after the closing of the Offering, a majority of the Company's Board of Directors will be dentists who are affiliated with Affiliated Practices. The following table sets forth certain information concerning the Company's directors, the nine persons nominated to become directors on the closing of the Offering and the executive officers of the Company (ages are as of December 1, 1997):
NAME AGE POSITION - --------------------------------------- --- ---------------------------------------------------------------- Omer K. Reed, D.D.S.................... 65 Chairman of the Board and Clinical Officer Gary S. Glatter........................ 44 President, Chief Executive Officer and Director Sam H. Carr(1)......................... 41 Senior Vice President, Chief Financial Officer and Director James L. Dunn, Jr.(2).................. 35 Senior Vice President, Chief Development Officer and Director John G. Thayer......................... 43 Senior Vice President and Chief Operating Officer Kimberlee K. Rozman.................... 37 Senior Vice President, General Counsel and Secretary Ronnie L. Andress, D.D.S.(1)........... 42 Director J. Michael Casas....................... 35 Director James H. Clarke, Jr., D.D.S.(1)........ 49 Director Ronald E. Geistfeld, D.D.S.(1)......... 63 Director Allen M. Gelwick(2).................... 38 Director Mack E. Greder, D.D.S.(1).............. 53 Director Roger Allen Kay, D.D.S.(1)............. 52 Director Gerald F. Mahoney(1)................... 53 Director Anthony P. Maris(1).................... 63 Director George M. Siegel....................... 59 Director Ronald M. Yaros, D.D.S.(1)............. 51 Director
- --------- (1) Appointment as a director will become effective upon the closing of the Offering. (2) Each of Mr. Dunn and Mr. Gelwick intends to resign as a director upon the closing of the Offering. OMER K. REED, D.D.S. has served as the Company's Chairman of the Board and Clinical Officer since May 1997. He founded Pentegra, Ltd. in 1988 and Napili in 1963, and is a practicing dentist with one of the Founding Affiliated Practices. Since inception, Pentegra, Ltd. and Napili have provided comprehensive management and consulting services to dental practices around the nation. In 1965, Dr. Reed founded the CeramDent Laboratory and he has maintained a private dental practice in Phoenix since 1959. He has held associate professorships in the Departments of Ecological Dentistry at the University of North Carolina, Chapel Hill (1978-1988) and the University of Minnesota (1982-1991), and has lectured extensively around the world on various subjects related to the practice of dentistry. Dr. Reed also serves on the Board of Directors of Century Companies of America, CUNA Mutual Insurance Group and the American Volunteer Medical Team. Pursuant to the terms of his employment agreement with the Company, the Company has undertaken to use its best efforts to elect Dr. Reed as a director of the Company. GARY S. GLATTER has served as the Company's President, Chief Executive Officer and a Director since May 1997. From January 1994 to March 1997, he was President and Chief Operating Officer of H.E.R.C. Products Incorporated, a public company engaged in manufacturing and selling chemical rehabilitation products for water distribution systems. From 1989 until 1993, Mr. Glatter served as President and Chief Executive Officer of Classic Properties, a New York-based real estate company. Pursuant to the terms of his employment agreement with the Company, the Company has undertaken to use its best efforts to elect Mr. Glatter as a director of the Company. 36 SAM H. CARR has served as the Company's Senior Vice President and Chief Financial Officer since September 1997. From September 1996 until August of 1997, Mr. Carr served as Vice President--Finance and Corporate Development of Ankle & Foot Centers of America, LLP, a podiatry practice management company. From February 1995 until July 1996, Mr. Carr was a Senior Manager with Arthur Andersen LLP. Prior thereto, Mr. Carr was Chief Financial Officer of Columbia/HCA's Bellaire Hospital in Houston, Texas from January 1994 until January 1995, and Vice President of Finance of St. Vincent Hospital in Santa Fe, New Mexico from 1990 until 1994. Mr. Carr is a certified public accountant. Pursuant to the terms of his employment agreement with the Company, the Company has undertaken to use its best efforts to elect Mr. Carr as a director of the Company. JAMES L. DUNN, JR. has served as the Company's Senior Vice President and Chief Development Officer since July 1997 and as a Director since March 1997. Since 1987, Mr. Dunn has been an attorney practicing as a sole practitioner in Houston, Texas. His legal practice is focused on providing services to members of the dental community. He has been actively involved in the valuation and sale of dental practices over the past five years. In 1995, Mr. Dunn was appointed to the Texas Medical Disclosure Panel, the body that determines which dental procedures require informed consent. Mr. Dunn is a member of the American Society of Pension Actuaries and is a certified public accountant. JOHN G. THAYER has served as the Company's Senior Vice President and Chief Operating Officer since March 1997. Prior thereto, Mr. Thayer was Managing General Partner of England and Company, a public accounting firm he co-founded in 1983, which provides accounting and practice management counseling to health care professionals in the Texas Gulf Coast area. In 1994, he co-founded Medtek Management, Inc., a privately held management information company specializing in the data processing needs of health care professionals. KIMBERLEE K. ROZMAN has served as the Company's Senior Vice President, General Counsel and Secretary since July 1997. Prior thereto, she served as Vice President, Senior Counsel (January to July 1997) and Associate General Counsel (1996) of Physicians Resource Group, Inc., a public company engaged in providing ophthalmic practice management services. From 1990 to 1996, Ms. Rozman was an associate with the law firm of Jackson Walker L.L.P. RONNIE L. ANDRESS, D.D.S. has been engaged in the private practice of dentistry in Freeport, Texas since 1995 and is President of Ronnie L. Andress, D.D.S., Inc., one of the Founding Affiliated Practices. Prior to 1995, Dr. Andress was engaged in the private practice of dentistry in Houston, Texas for over 12 years. J. MICHAEL CASAS has been the President of Gustavia Investments, L.L.C. (a newly organized venture capital firm) since October 1997. Prior thereto, he served as a Vice President of Physicians Resource Group, Inc. from June 1995 to October 1997. From October 1991 to June 1995, Mr. Casas served as Administrator of Texas Eye Institute Assoc., a comprehensive eye care provider in the greater Houston, Texas area. JAMES H. CLARKE, JR., D.D.S. has been engaged in the private practice of dentistry in Houston, Texas since 1974 and is President of James H. Clark, Jr., D.D.S., Inc., one of the Founding Affiliated Practices. RONALD E. GEISTFELD, D.D.S. is Professor Emeritus at the University of Minnesota School of Dentistry, where he has taught since 1982. Dr. Geistfeld also maintained a part-time dental practice in Minnesota from 1973 to 1992. He is a member of the Minnesota Dental Association, the Minneapolis District Dental Society, the American College of Dentists, the Academy of Operative Dentistry, the Minnesota Academy of Restorative Dentistry and the Minnesota Academy for Gnathological Research. ALLEN M. GELWICK has served as a Senior Vice President of Alexander & Alexander, an insurance brokerage firm, since 1995 and was previously a member of Alexander & Alexander's Chairman's Council. From 1992 until 1994, he served as Senior Vice President for Minet Insurance Services. Prior thereto, Mr. Gelwick served as Senior Vice President for Frank B. Hall & Co. and was an underwriter for Chubb Insurance. 37 MACK E. GREDER, D.D.S. has been engaged in the private practice of dentistry in Omaha, Nebraska since 1970 and is President of Mack E. Greder, D.D.S., P.C., one of the Founding Affiliated Practices. ROGER ALLEN KAY, D.D.S. has been engaged in the private practice of dentistry in Farmington and Livermore Falls, Maine since 1972 and is President of Roger Allen Kay, D.D.S., P.A., one of the Founding Affiliated Practices. He is a member of the Maine Dental Association, the American Dental Association, the Academy of General Dentistry and the American Society of Dentistry for Children. GERALD F. MAHONEY has been Chairman of the Board and Chief Executive Officer of Mail-Well, Inc., a public company engaged in printing and envelope manufacturing with over 50 printing offices throughout the United States, since 1994. Prior thereto, he served as Chairman of the Board, President and Chief Executive Officer of Pavey Envelope beginning in 1991. Mr. Mahoney is a certified public accountant. ANTHONY P. MARIS is a consultant to health care businesses. From 1987 to 1996, Mr. Maris was a Director, Vice President, Chief Financial Officer and Treasurer of Roberts Pharmaceutical Corporation, a public company engaged in pharmaceuticals manufacturing. Prior thereto, Mr. Maris was a Director and Chief Financial Officer of Hoffmann--La Roche Inc., a pharmaceutical manufacturer. GEORGE M. SIEGEL was President and Chief Executive Officer of Parcelway Courier Systems, Inc., a publicly traded messenger and courier business with operations throughout North America, from 1990 to 1997. In 1993, Mr. Siegel co-founded U.S. Delivery Systems, a public company engaged in consolidating local messenger and delivery companies. Prior thereto, Mr. Siegel founded and was the President and Chief Executive Officer of U.S. Messenger & Delivery Service and Direct Dispatch Corporation, two messenger and courier service companies that he sold to Mayne Nickless Courier System, Inc. RONALD M. YAROS, D.D.S. has been engaged in the private practice of dentistry in Aurora, Colorado since 1973 and is President of Ronald M. Yaros, D.D.S., P.C., one of the Founding Affiliated Practices. He is a member of the American Dental Association, the Colorado Dental Association, the Metro Denver Dental Society and the Academy of General Dentistry. BOARD OF DIRECTORS The Board of Directors will be divided into three classes with at least four directors in each class, with the term of one class expiring at the annual meeting of stockholders in each year, commencing in 1998. At each annual meeting of stockholders, directors of the class the term of which then expires will be elected by the holders of the Common Stock to succeed those directors whose terms are expiring. The first class, whose term of office will expire at the first annual meeting of stockholders in 1998, is comprised of Drs. Andress, Geistfeld and Kay, and Mr. Casas; the second class, whose term will expire one year thereafter, is comprised of Drs. Clarke, Greder and Yaros and Mr. Carr; and the third class, whose term will expire two years thereafter, is comprised of Dr. Reed and Messrs. Glatter, Mahoney, Maris and Siegel. The Company's Bylaws provide that a majority of the members of the Board of Directors must be licensed to practice dentistry and affiliated with one of the Affiliated Practices. See "Risk Factors--Board Composition." On closing of the Offering, there will be three committees of the Board: Audit, Compensation and Executive. The initial members of the Audit Committee will be Messrs. Maris and Mahoney. The initial members of the Compensation Committee will be Messrs. Maris, Siegel and Casas. The initial members of the Executive Committee will be Dr. Reed and Messrs. Glatter and Siegel. The members of the Audit and Compensation Committees will not be employees of the Company. Directors who are employees of the Company or a Founding Affiliated Practice do not receive additional compensation for serving as directors. Each director who is not an employee of the Company or a Founding Affiliated Practice will receive a fee of $1,500 for attendance at each Board of Directors meeting and $750 for each committee meeting (unless held on the same day as a Board of Directors meeting), and an initial grant of nonqualified options to purchase 10,000 shares of Common Stock (except 38 with respect to Messrs. Casas and Siegel, who have waived their right to receive those options). Directors who are not employees of the Company will also receive annual grants of nonqualified options to purchase 5,000 shares on the first business day of the month following the date on which each annual meeting of the Company's stockholders is held. See "--1997 Stock Compensation Plan." All directors of the Company are reimbursed for out-of-pocket expenses incurred in attending meetings of the Board of Directors or committees thereof, and for other expenses incurred in their capacity as directors of the Company. EXECUTIVE COMPENSATION Pentegra has conducted no operations to date other than in connection with the Offering and the Affiliations. The Company anticipates that during 1997 its most highly compensated executive officers will be Dr. Reed and Messrs. Glatter, Carr, Dunn and Thayer (the "Named Executive Officers"), each of whom has entered or will enter into an employment agreement providing for an annual salary of $175,000, $175,000, $175,000, $125,000 and $125,000, respectively. See "--Employment Agreements." In addition to base salary, Messrs. Glatter, Carr, Dunn and Thayer through their employment agreements are eligible for certain bonuses described under "--Employment Agreements" and performance bonuses based on the achievement of specific financial targets of the Company. Performance bonuses will not exceed 50% of base salary for each of those officers, except Mr. Glatter (whose bonus will not exceed 200% of his base salary). In September 1997, the Company granted options to purchase 333,333 shares, 66,667 shares, 33,333 shares and 33,333 shares of Common Stock to Messrs. Glatter, Carr, Dunn and Thayer, respectively, under the Company's 1997 Stock Compensation Plan, exercisable at the initial public offering price per share set forth on the cover page of this Prospectus. Of the options granted to Mr. Glatter, options to acquire 166,667 shares vest on the first anniversary of the date of this Prospectus, options to acquire 66,667 shares vest on each of the second and third anniversaries of the date of this Prospectus, and options to acquire 33,333 shares vest on the fourth anniversary of the date of this Prospectus. The options granted to Messrs. Carr, Dunn and Thayer vest annually in 20% increments beginning on the first anniversary of the date of this Prospectus. See "--1997 Stock Compensation Plan." EMPLOYMENT AGREEMENTS The Company has entered into employment agreements with Dr. Reed, Messrs. Glatter, Carr, Dunn and Thayer and Ms. Rozman. These agreements, which will be effective on the closing of the Affiliations and the Offering, have been filed as exhibits to the Registration Statement of which this Prospectus is a part. Each of these agreements provides for an annual base salary in an amount not less than the initial specified amount and entitles the employee to participate in all the Company's compensation plans in which other executive officers of the Company participate. Dr. Reed's employment agreement provides that he will serve as the Company's clinical officer and has a three-year term commencing on completion of the Offering. Dr. Reed's base salary under the employment agreement will be $175,000 per year, or as increased from time to time by the Board of Directors, and provides for bonus payments aggregating $1,250,000 payable by the Company in installments of $10,000 on closing of each future dental practice affiliation subsequent to the Offering until the bonus has been paid in full, provided that the bonus must be paid in full by the third anniversary of the date of this Prospectus. Mr. Glatter's employment agreement provides that he will serve as the Company's chief executive officer and president and has at least a four-year term commencing on July 1, 1997. Mr. Glatter's base salary under the employment agreement will be as follows: (i) $175,000 per year for the period from July 1, 1997 through June 30, 1998, (ii) $200,000 per year for the period from July 1, 1998 through June 30, 1999, (iii) $225,000 per year for the period from July 1, 1999 through June 30, 2000 and (iv) $250,000 per year from July 1, 2000 thereafter or as increased from time-to-time by the Board of Directors. Each of the agreements for Messrs. Carr, Dunn and Thayer and Ms. Rozman has a continuous five-year term with an annual base salary of $175,000 for Mr. Carr and of $125,000 for each of the other officers, and is subject to the right of the Company to terminate the 39 employee's employment at any time. Mr. Glatter is eligible to receive an annual cash bonus in an amount equal to 50%, 100%, 150% or 200% of his base salary in the event that the Company experiences from 5% to 9.99%, 10% to 19.99%, 20% to 29.99% or greater than 30%, respectively, growth in earnings per share on a year-to-year basis (calculated on a pro forma basis for the calendar year prior to the Company's first fiscal year of operations). For purposes of determining the applicable year's earnings per share change, the cash bonuses payable to Mr. Glatter and under all other employment agreements between the Company and its officers will be taken into account. Each of the other named officers (except Dr. Reed and Mr. Glatter) is eligible to receive an annual cash bonus in an amount equal to 10%, 20%, 30%, 40% or 50% of his or her base salary in the event that the Company experiences 20% to 22.5%, 22.5% to 25%, 25% to 27.5%, 27.5% to 30% or greater than 30%, respectively, growth in earnings per share on a year-to-year basis (calculated on a pro forma basis for the calendar year prior to the Company's first fiscal year of operations). For purposes of determining the applicable year's earnings per share change, the cash bonuses payable to the officer and under all other employment agreements between the Company and its officers will be taken into account. If the employee's employment is terminated by the Company without cause (as defined), Messrs. Carr, Dunn and Thayer and Ms. Rozman will be entitled to a payment equal to either 12 months' or six months' salary depending on whether such employee has relocated to Phoenix, Arizona, and Dr. Reed and Mr. Glatter will be entitled to a payment equal to the salary payable over the remaining term of their respective employment agreements. Mr. Thayer will also receive a $25,000 bonus on the closing of the Offering and a $25,000 bonus on the first anniversary of that closing. Each of the foregoing agreements also contains a covenant limiting competition with the Company for one year following termination of employment. Each Founding Affiliated Practice will enter into an employment agreement with its dentist employees. See "Business--Dentist Employment Agreements." 1997 STOCK COMPENSATION PLAN In August 1997, the Board of Directors adopted, and the stockholders of the Company approved, the 1997 Stock Compensation Plan. The purpose of the 1997 Stock Compensation Plan is to provide the Company's employees, non-employee directors and advisors and employees and directors of Affiliated Practices with additional incentives by increasing their proprietary interest in the Company. The aggregate number of shares of Common Stock with respect to which options and awards may be granted under the 1997 Stock Compensation Plan may not exceed 2,000,000 shares. The 1997 Stock Compensation Plan provides for the grant of incentive stock options ("ISOs"), as defined in Section 422 of the Code, nonqualified stock options (collectively with ISOs, "Options") and restricted stock awards ("Awards"). Following the consummation of the Offering, the 1997 Stock Compensation Plan will be administered by the Compensation Committee of the Board of Directors, which will be comprised of not less than two members of the Board of Directors (the "Committee"). Prior to the consummation of the Offering, the 1997 Stock Compensation Plan had been administered by the Company's full Board of Directors. The Committee has, subject to the terms of the 1997 Stock Compensation Plan, the sole authority to grant Options and Awards under the 1997 Stock Compensation Plan, to interpret the 1997 Stock Compensation Plan and to make all other determinations necessary or advisable for the administration of the 1997 Stock Compensation Plan. All of the Company's employees, non-employee directors and advisors and employees and directors of Affiliated Practices are eligible to receive nonqualified stock options and Awards under the 1997 Stock Compensation Plan, but only employees of the Company are eligible to receive ISOs. Options will be exercisable during the period specified in each option agreement and will generally be exercisable in installments pursuant to a vesting schedule to be designated by the Committee. Notwithstanding the provisions of any option agreement, options will become immediately exercisable in the event of certain 40 events including certain merger or consolidation transactions and changes in control of the Company. No Option will remain exercisable later than ten years after the date of grant (or five years from the date of grant in the case of ISOs granted to holders of more than 10% of the outstanding Common Stock). An Award grants the recipient the right to receive a specified number of shares of Common Stock, which shall become vested over a period of time, not exceeding 10 years, specified by the Committee. Restricted stock transferred to a recipient shall be forfeited upon the termination of the recipient's employment or service other than for death, permanent disability or retirement unless the Committee, in its sole discretion, waives the restrictions for all or any part of an Award. The exercise price for ISOs granted under the 1997 Stock Compensation Plan may be no less than the fair market value of the Common Stock on the date of grant (or 110% of the fair market value in the case of ISOs granted to employees owning more than 10% of the Common Stock). The exercise price for nonqualified options granted under the 1997 Stock Compensation Plan may not be less than the fair market value of the Common Stock on the date of grant. Payment upon exercise of an Option may be made in cash or by check, by means of a "cashless exercise" involving the sale of shares by, or a loan from, a broker, or, in the discretion of the Committee, by delivery of shares of Common Stock, by payment of the par value of the shares subject to the Option plus a promissory note for the balance of the exercise price or in any other form of valid consideration permitted by the Committee. There are generally no federal income tax consequences upon the grant of an Option under the 1997 Stock Compensation Plan. Upon exercise of a nonqualified option, the optionee generally will recognize ordinary income in the amount equal to the difference between the fair market value of the shares at the time of exercise and the exercise price, and the Company is generally entitled to a corresponding deduction. When an optionee sells shares issued upon the exercise of a nonqualified stock option, the optionee realizes short-term, mid-term or long-term capital gain or loss, depending on the length of the holding period. If the optionee holds the shares for more than 18 months, the capital gain or loss will be long-term capital gain or loss. If the optionee holds the shares for more than one year but not more than 18 months, the capital gain or loss will be mid-term capital gain or loss. Otherwise, the capital gain or loss will be short-term capital gain or loss. The Company is not entitled to any deduction in connection with such sale. An optionee will not be subject to federal income taxation upon the exercise of ISOs granted under the 1997 Stock Compensation Plan, and the Company will not be entitled to a federal income tax deduction by reason of such exercise. A sale of shares of Common Stock acquired upon exercise of an ISO that does not occur within one year after the date of exercise or within two years after the date of grant of the option generally will result in the recognition of long-term or mid-term capital gain or loss by the optionee in an amount equal to the difference between the amount realized on the sale and the exercise price, and the Company is not entitled to any deduction in connection therewith. If a sale of shares of Common Stock acquired upon exercise of an ISO occurs within one year from the date of exercise of the option or within two years from the date of the option grant (a "disqualifying disposition"), the optionee generally will recognize ordinary income equal to the lesser of (i) the excess of the fair market value of the shares on the date of exercise of the options over the exercise price or (ii) the excess of the amount realized on the sale of the shares over the exercise price. Any amount realized on a disqualifying disposition in excess of the amount treated as ordinary income will be long-term or short-term capital gain, depending upon the length of time the shares were held. The Company generally will be entitled to a tax deduction on a disqualifying disposition corresponding to the ordinary income recognized by the optionee. For alternative minimum tax purposes, the difference between the fair market value, on the date of exercise, of Common Stock purchased upon the exercise of an ISO, and the exercise price increases alternative minimum taxable income. Additional rules apply if an optionee makes a disqualifying disposition of the Common Stock. 41 There are generally no federal income tax consequences upon the grant of an Award, except as described below regarding a section 83(b) election. Upon the expiration of the restrictions on shares of Common Stock subject to an Award, except as provided in the next sentence, the recipient of the Award will recognize taxable ordinary income equal to the fair market value of the shares at the time of such expiration. If the recipient of an Award elects, pursuant to section 83(b) of the Code, within 30 days of the date shares of restricted stock are considered transferred to the recipient, to recognize taxable ordinary income at the time of the transfer in an amount equal to the fair market value of such shares, no additional income will be recognized upon the lapse of the restrictions on the shares and no deduction will be allowed to the recipient if the shares are subsequently forfeited. A recipient who makes such an election under section 83(b) is required to give notice of such election to the Company immediately after making the election, and the Company will be entitled to a deduction equal to the amount of income recognized by the recipient. For capital gain purposes, the recipient's holding period for the shares received will begin at the time taxable income is recognized under these rules and his or her basis in the shares will be the amount of ordinary income recognized. The Company anticipates that upon the consummation of the Offering it will have (i) outstanding options to purchase a total of 671,667 shares of Common Stock under the 1997 Stock Compensation Plan and (ii) 1,328,333 additional shares available for future awards under the 1997 Stock Compensation Plan. 42 CERTAIN TRANSACTIONS ORGANIZATION OF THE COMPANY In connection with the formation of the Company, in February 1997, PII issued common stock to J. Michael Casas (200,000 shares), James L. Dunn, Jr. (100,000 shares), John G. Thayer (66,667 shares) and Allen M. Gelwick (66,667 shares), at a purchase price per share of $0.01. In May 1997, PII issued Class B Preferred to J. Michael Casas (66,667 shares) and James L. Dunn, Jr. (33,334 shares), at a purchase price per share of $0.01. In May 1997, PII issued Common Stock to George M. Siegel (300,000 shares), Dr. Reed (150,000 shares), Gary S. Glatter (100,000 shares), Kelly W. Reed (150,000 shares) and Kimberlee K. Rozman (33,333 shares), at a purchase price per share of $0.01. In September 1997 and October 1997, PII repurchased 46,667 shares and 20,000 shares, respectively, of its common stock from George M. Siegel at a purchase price per share of $0.01. In September 1997, the Company issued 66,667 shares of common stock to Sam H. Carr at a purchase price of $0.01 per share. In connection with the raising of $1,450,000 by PII in order to fund a portion of the expenses for the Offering and the Affiliations, in June 1997, PII issued capital stock to Dr. Reed (37,500 shares of Class B Preferred and 7,500 shares of common stock), Gary S. Glatter (37,500 shares of Class B Preferred and 7,500 shares of common stock), George M. Siegel (37,500 of Class B Preferred and 7,500 shares of common stock), Mack E. Greder, D.D.S. (25,000 shares of Class B Preferred and 5,000 shares of common stock), Roger Allen Kay, D.D.S. (25,000 shares of Class B Preferred and 5,000 shares of common stock), Bruce A. Kanehl, D.D.S. (25,000 shares of Class B Preferred and 5,000 shares of common stock), Brian K. Kniff, D.D.S. (25,000 shares of Class B Preferred and 5,000 shares of common stock), Richard W. Mains, Jr., D.M.D., RBM Trust (25,000 shares of Class B Preferred and 5,000 shares of common stock), James W. Medlock, D.D.S. (25,000 shares of Class B Preferred and 5,000 shares of common stock), Thomas L. Mullooly, D.D.S. (25,000 shares of Class B Preferred and 5,000 shares of common stock), Richard H. Fettig, D.D.S. (25,000 shares of Class B Preferred and 5,000 shares of common stock), Marvin V. Cavallino, D.D.S. (50,000 shares of Class B Preferred and 10,000 shares of common stock), Alan H. Gerbholz, D.D.S. (25,000 shares of Class B Preferred and 5,000 shares of common stock), Victor H. Burdick, D.D.S. (25,000 shares of Class B Preferred and 5,000 shares of common stock), Steve Anderson, D.D.S. (25,000 shares of Class B Preferred and 5,000 shares of common stock) and James P. Allen, D.D.S. (25,000 shares of Class B Preferred and 5,000 shares of common stock), at a purchase price per share of $1.00 for the Class B Preferred and of $0.01 for the common stock. In September 1997, (i) each owner of shares of common stock of PII agreed to exchange those shares for shares of Common Stock on a one-for-one basis and (ii) each of Dr. Reed and Messrs. Glatter, Dunn, Casas and Siegel agreed to sell to PII all shares of Class B Preferred he owns at a price per share equal to the subscription price he paid to PII for those shares, which transactions will occur concurrently with the closing of the Offering and the Affiliations. In addition, immediately after the completion of the repurchases described in the foregoing sentence, all outstanding shares of Class A Preferred and Class B Preferred will be redeemed by PII at a redemption price of $2.00 per share from the proceeds of the Offering. In December 1997, the owners of the outstanding shares of common stock of PII agreed that, in the event the initial public offering price is less than $12.00 per share, PII will repurchase from those stockholders, on a pro rata basis, at a purchase price of $.01 per share, that number of shares as will be necessary so that the aggregate number of shares of Common Stock issuable in connection with the Affiliations and the Share Exchange will not exceed 3,941,898 shares. Pursuant to that agreement, assuming an initial public offering price of $10.00 per share, PII would repurchase approximately 24.9% of each such stockholder's shares of PII common stock, or an aggregate of 437,038 shares. The Company has entered into an agreement with Pentegra, Ltd., Napili and Dr. Reed to purchase substantially all of the tangible and intangible assets of Pentegra, Ltd. and Napili for $200,000 upon completion of the Offering. Dr. Reed beneficially owns approximately 51.0% of the capital stock of each of Pentegra, Ltd. and Napili and the Reed Family Trust (which is administered by, and whose beneficiaries 43 are, the children of Dr. Reed) beneficially owns 49% of the capital stock of each of Pentegra, Ltd. and Napili. The assets that the Company will acquire from Pentegra, Ltd. and Napili include office furniture and equipment, marketing systems, recall systems, telephone systems, customer/client lists, books and records and video tapes. Since February 1997, the Company has occupied and had access to the facilities, equipment and staff of James L. Dunn & Assoc., Inc., an affiliate of James L. Dunn, Jr. Beginning June 1, 1997, the Company agreed to compensate James L. Dunn & Assoc., Inc. for use of and access to its office facilities, equipment and staff at the rate of $10,000 per month. James L. Dunn & Assoc., Inc. will also provide the Company a monthly invoice for delivery, postage, telephone, travel and other out-of-pocket expenses and obtain reimbursement for those expenses from the Company. Through October 31, 1997, the Company has reimbursed James L. Dunn & Assoc., Inc. for approximately $9,000 of such expenses. The Company believes that the compensation paid to James L. Dunn & Assoc., Inc. represents the fair market value of the services (which includes the shared use of two clerical employees, use of office furniture, copy machines, computers and other office equipment, and office supplies) provided to the Company. Subsequent to the Offering, this arrangement may continue on a month-to-month basis at the discretion of the Company. The Company has leased a portion of the office facilities, equipment and staff of Pentegra, Ltd., which is wholly owned by Dr. Reed, beginning June 1, 1997. The Company has agreed to compensate Pentegra, Ltd. for use of and access to its office facilities, equipment and staff at the rate of $11,000 per month. Pentegra, Ltd. will also provide the Company a monthly invoice for delivery, postage, telephone, travel and other out-of-pocket expenses and obtain reimbursement for those expenses from the Company. Through October 31, 1997, the Company has reimbursed Pentegra, Ltd. and Napili for approximately $6,000 of such expenses. The Company believes that the compensation to be paid to Pentegra, Ltd. represents the fair market value of the goods and services (which includes utilities, furniture, office equipment and clerical services) being provided to the Company under this arrangement. This lease will be assumed by the Company in the Pentegra/Napili Transaction. The following table provides certain information concerning each of the Affiliations and each person who has an ownership interest in a Founding Affiliated Practice (all of whom are promoters of the Company):
CONSIDERATION TO BE RECEIVED DEBT AND --------------------------------------- ASSETS TO BE LIABILITIES NUMBER OF VALUE OF FOUNDING AFFILIATED PRACTICE(1) CONTRIBUTED(2) ASSUMED SHARES(3) SHARES(3) CASH - ----------------------------------------- -------------- ------------ ---------- ------------- ------------ James P. Allen, D.D.S.................... $ 54,224 $ 67,069 55,320 $ 553,200 $ 138,301 Anderson Dental Group, Inc.: Walter J. Anderson, D.D.S.............. 12,818 56,581 32,950 329,500 82,376 Donald H. Plotkin, D.D.S............... 12,012 53,026 30,880 308,800 77,200 William A. Cerney, D.D.S............... 10,132 44,730 26,049 260,490 65,122 Brian M. Ellis, D.D.S.................. 10,132 44,730 26,049 260,490 65,122 Afshan Kaviani, D.D.S.................. 9,282 40,976 23,863 238,630 59,658 William H. Swilley, D.D.S.............. 2,571 11,348 6,609 66,090 16,522 Ronnie L. Andress, D.D.S., Inc........... 119,366 181,623 86,531 865,310 216,326 Victor H. Burdick, D.D.S., P.C........... -- 4,344 45,650 456,500 114,126 Marvin V. Cavallino, D.D.S., A Professional Corporation............... 40,340 72,426 57,379 573,790 143,447 James H. Clarke, Jr., D.D.S., Inc........ 134,400 131,952 52,011 520,110 130,027 Henry F. Cuttler, D.D.S.................. 91,705 114,028 31,684 316,840 79,211 Edward T. Dougherty, Jr., D.D.S., P.A.... 13,284 -- 93,132 931,320 232,830 Family Dental Center, P.A.: Steve Anderson, D.D.S.................. 48,830 -- 70,685 706,850 176,711 Lindi B. Anderson, D.D.S............... 12,208 -- 17,671 176,710 44,178
(TABLE CONTINUED) 44
CONSIDERATION TO BE RECEIVED DEBT AND --------------------------------------- ASSETS TO BE LIABILITIES NUMBER OF VALUE OF FOUNDING AFFILIATED PRACTICE(1) CONTRIBUTED(2) ASSUMED SHARES(3) SHARES(3) CASH - ----------------------------------------- -------------- ------------ ---------- ------------- ------------ Richard H. Fettig, D.D.S................. 14,288 19,836 38,921 389,210 97,303 Alan H. Gerbholz, D.D.S., P.C............ 15,154 -- 36,581 365,810 91,451 Michael J. Gershtenson, D.D.S., P.C...... 92,794 24,948 39,227 392,270 98,067 Mack E. Greder, D.D.S., P.C.............. 43,211 37,505 57,273 572,730 143,183 Salvatore Guarnieri, D.D.S............... 76,652 28,205 40,118 401,180 100,295 Kent Hamilton, D.D.S..................... 160,781 200,000 95,305 953,050 238,262 David R. Henderson, D.D.S................ 6,202 -- 34,044 340,440 85,109 Stephen Hwang, D.D.S..................... 14,198 -- 29,973 299,730 74,931 Jackson Dental Partnership: Penn Jackson, Sr., D.D.S............... 47,842 -- 26,056 260,560 -- Penn Jackson, Jr., D.D.S............... 31,894 -- 17,371 173,710 -- Bruce A. Kanehl, D.D.S................... -- 22,532 58,951 589,510 147,378 Roger Allen Kay, D.D.S., P.A............. 19,883 4,816 57,607 576,070 144,017 Patrick T. Kelly, D.D.S., P.C............ 20,133 12,000 15,603 156,030 39,008 Brian K. Kniff, D.D.S., P.C.: Brian K. Kniff, D.D.S.................. 102,477 23,327 45,539 455,390 113,848 Gordon Ledingham, D.D.S................ 102,477 23,327 45,539 455,390 113,848 Lakeview Dental, P.C. (Kevin Gasser, D.D.S.)................................ 19,586 34,803 40,872 408,720 102,180 Donald W. Lanning, D.D.S................. 39,167 -- 24,867 248,670 40,000 David A. Little, D.D.S................... 89,519 230,859 42,336 423,360 105,840 Susan Lunson, D.D.S...................... 73,457 190,675 23,701 237,010 59,253 Richard W. Mains, Jr., D.M.D., P.C....... 86,785 -- 67,261 672,610 168,152 James M. McDonough, D.D.S................ 43,476 56,000 50,570 505,700 126,424 James W. Medlock, D.D.S., P.A............ 18,282 33,066 71,976 719,760 179,940 James Randy Mellard, D.D.S. M.S., P.C.... 48,327 65,242 12,794 127,940 31,986 Mary B. Mellard, D.D.S., P.C............. 128,119 230,733 51,425 514,250 128,562 TL Mullooly, D.D.S., Inc................. 48,812 -- 38,767 387,670 96,918 Byron L. Novosad, D.D.S., Inc............ 6,594 -- 39,969 399,690 99,923 Randy O'Brien, D.D.S., Inc............... 21,527 27,753 30,725 307,250 76,811 Terrence C. O'Keefe, D.D.S............... 45,442 52,139 24,300 243,000 81,000 Harold A. Pebbles, Jr., D.D.S., P.C...... -- -- 47,857 478,570 119,641 Jimmy F. Pinner, D.D.S................... 18,664 12,000 14,647 146,470 36,619 Omer K. Reed, D.D.S...................... 17,806 0 31,298 312,980 -- Richard Reinitz, D.D.S., P.C............. 96,284 226,009 126,395 1,263,950 315,988 Greg Richards, D.D.S..................... 49,194 59,000 16,524 165,240 41,302 Richard N. Smith, D.M.D., P.C............ 34,399 94,998 81,252 812,520 203,129 John N. Stellpflug, D.D.S................ 20,079 36,750 40,002 400,020 100,006 Jack Stephens, D.D.S..................... 54,409 -- 102,609 1,026,090 256,523 Y. Paul Suzuki, D.D.S., P.C.............. 18,900 1,864 38,348 383,480 95,870 Donald F. Tamborello, D.D.S.............. 13,808 7,565 45,864 458,640 114,660 Helena Thomas, D.D.S..................... 93,011 113,013 24,626 246,260 61,566 Louis J. Thornley, D.D.S., P.C........... 25,843 -- 35,595 355,950 88,989 S. Victor Uhrenholdt, D.D.S., P.C........ 42,716 50,157 50,687 506,870 126,718 Scott Van Zandt, D.D.S................... 7,741 1,675 34,099 340,990 85,248 Ronald M. Yaros, D.D.S., P.C............. 216,938 5,404 118,332 1,183,320 295,830 -------------- ------------ ---------- ------------- ------------ $ 2,698,175 $ 2,749,034 2,622,269 $ 26,222,690 $ 6,366,935 -------------- ------------ ---------- ------------- ------------ -------------- ------------ ---------- ------------- ------------
- --------- (1) Unless otherwise noted, the dentist who owns all of the capital stock of the Founding Affiliated Practice is set forth in the name of that Founding Affiliated Practice. 45 (2) Assets to be contributed reflects the historical book value of the nonmonetary assets of each practice to be transferred to the Company. These nonmonetary assets are reflected at historical cost in accordance with SAB No. 48. All monetary assets are recorded at fair value, which is approximated by the historical costs recorded by the practices. (3) Assumes an initial public offering price of $10.00 per share. The actual number of shares to be issued as consideration for the Affiliations may be higher or lower depending on the actual initial public offering price per share. For example, an aggregate of 2,383,881 shares of Common Stock would be issued to the dentist-owners of the Founding Affiliated Practices if that price is $11.00 per share, while an aggregate of 2,913,631 shares of Common Stock would be issued to the dentist-owners of the Founding Affiliated Practices if that price is $9.00 per share. The consideration being paid by the Company for each Founding Affiliated Practice was determined by negotiations between executive officers of the Company not affiliated with any Founding Affiliated Practice and a representative of that Founding Affiliated Practice. The Company used the same valuation method to negotiate the consideration being paid to each of the Founding Affiliated Practices, including the respective practices wholly owned by Drs. Reed, Andress, Clarke, Greder, Kay and Yaros, which method was based upon the Founding Affiliated Practice's gross revenue net of certain operating expenses, and the Company's assessment of growth potential. All of the 2,622,269 shares of Common Stock issued in the Affiliations to the dentists named in the foregoing table and all of 1,319,629 shares of Common Stock in the Share Exchange will have certain piggy-back registration rights. See "Shares Eligible for Future Sale." COMPANY POLICY It is anticipated that future transactions with affiliates of the Company will be minimal, will be approved by a majority of the disinterested members of the Board of Directors and will be made on terms no less favorable to the Company than could be obtained from unaffiliated third parties. The Company does not intend to incur any further indebtedness to, or make any loans to, any of its executive officers, directors or other affiliates. 46 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table shows, as of December 1, 1997 and immediately after giving effect to the closing of the Affiliations and the Offering, the then "beneficial ownership" of the Common Stock of (i) each director and person nominated to become a director on closing of the Offering, (ii) each executive officer, (iii) all executive officers and directors of the Company as a group and (iv) each person who owns more than 5% of the outstanding Common Stock. The table assumes none of such persons intend to acquire shares in the Offering. The address of each person in the table is c/o Pentegra Dental Group, Inc., 2999 North 44th Street, Suite 650, Phoenix, Arizona 85018.
SHARES BENEFICIALLY SHARES BENEFICIALLY OWNED OWNED BEFORE OFFERING AFTER OFFERING(1) ----------------------- ----------------------- NUMBER PERCENT NUMBER PERCENT ---------- ----------- ---------- ----------- Omer K. Reed, D.D.S.................................................. 157,500 9.0% 149,614 2.3% Gary S. Glatter...................................................... 107,500 6.1% 80,755 1.3% Sam H. Carr.......................................................... 66,667 3.8% 50,081 * James L. Dunn, Jr.................................................... 93,333 5.3% 70,113 1.1% John G. Thayer....................................................... 66,667 3.8% 50,081 * Kimberlee K. Rozman.................................................. 33,333 1.9% 25,040 * Ronnie L. Andress, D.D.S............................................. 0 -- 86,531 1.3% George M. Siegel..................................................... 240,833 13.7% 180,916 2.8% J. Michael Casas..................................................... 200,000 11.4% 150,242 2.3% Ronald M. Yaros, D.D.S............................................... 0 -- 118,332 1.8% Kelly W. Reed(2)..................................................... 150,000 8.5% 112,681 1.7% Roger Allen Kay, D.D.S............................................... 5,000 * 61,363 * Mack E. Greder, D.D.S................................................ 5,000 * 61,029 * James H. Clarke, Jr., D.D.S.......................................... 0 -- 52,011 * Allen M. Gelwick..................................................... 66,667 3.8% 50,081 * Ronald E. Geistfeld, D.D.S........................................... 0 -- 0 -- Gerald F. Mahoney.................................................... 0 -- 0 -- Anthony P. Maris..................................................... 0 -- 0 -- All executive officers and directors as a group (17 persons)......... 1,042,500 59.3% 1,178,677 18.3%
- --------- * less than 1%. (1) Shares shown in the above table do not include shares that could be acquired upon exercise of currently outstanding stock options which do not vest within 60 days of the date of this Prospectus. The number of shares of Common Stock to be issued in connection with the Affiliations (2,622,269 shares) and the Share Exchange (1,319,629 shares) assumes an initial public offering price of $10.00 per share. The actual number of such shares may be higher or lower depending on the actual initial public offering price per share. (2) Kelly W. Reed, Vice President of Operations of the Company, is the son of Omer K. Reed, D.D.S. 47 DESCRIPTION OF CAPITAL STOCK The Company's authorized capital stock consists of 40,000,000 shares of Common Stock, par value $.001 per share, and 10,000,000 shares of preferred stock, par value $.001 per share ("Preferred Stock"). At September 30, 1997, 1,756,667 shares of Common Stock were issued and outstanding and held of record by 52 stockholders. The following summary is qualified in its entirety by reference to the Certificate of Incorporation, which is included as an exhibit to the Registration Statement of which this Prospectus is a part. COMMON STOCK The Common Stock possesses ordinary voting rights for the election of directors and in respect of other corporate matters, and each share has one vote. The Common Stock affords no cumulative voting rights, and the holders of a majority of the shares voting for the election of directors can elect all the directors if they choose to do so. The Common Stock carries no preemptive rights, is not convertible, redeemable or assessable. The holders of Common Stock are entitled to dividends in such amounts and at such times as may be declared by the Board of Directors out of funds legally available therefor. See "Dividend Policy" for information regarding the Company's dividend policy. PREFERRED STOCK The Preferred Stock may be issued from time to time by the Board of Directors as shares of one or more series. Subject to the provisions of the Certificate of Incorporation and limitations prescribed by law, the Board of Directors is expressly authorized to adopt resolutions to issue the shares, to fix the number of shares and to change the number of shares constituting any series and to provide for or change the voting powers, designations, preferences and relative, participating, optional, exchange or other special rights, qualifications, limitations or restrictions thereof, including dividend rights (including whether dividends are cumulative), dividend rates, terms of redemption (including sinking fund provisions), redemption prices, conversion rights and liquidation preferences of the shares constituting any class or series of the Preferred Stock, in each case without any further action or vote by the holders of Common Stock. Although the Company has no present intention to issue shares of Preferred Stock, the issuance of shares of Preferred Stock, or the issuance of rights to purchase such shares, could be used to discourage an unsolicited acquisition proposal. For example, the issuance of a series of Preferred Stock might impede a business combination by including class voting rights that would enable the holders to block such a transaction; or such issuance might facilitate a business combination by including voting rights that would provide a required percentage vote of the stockholders. In addition, under certain circumstances, the issuance of Preferred Stock could adversely affect the voting power of the holders of the Common Stock. Although the Board of Directors is required to make any determination to issue such stock based on its judgment as to the best interests of the stockholders of the Company, the Board of Directors could act in a manner that would discourage an acquisition attempt or other transaction that some or a majority of the stockholders might believe to be in their best interests or in which stockholders might receive a premium for their stock over the then-market price of such stock. The Board of Directors does not at present intend to seek stockholder approval prior to any issuance of currently authorized stock, unless otherwise required by law or the rules of any market on which the Company's securities are traded. STATUTORY BUSINESS COMBINATION PROVISION The Company is a Delaware corporation and is subject to Section 203 of the DGCL. In general, Section 203 prevents an "interested stockholder" (defined generally as a person owning 15% or more of a corporation's outstanding voting stock) from engaging in a "business combination" (as defined) with a Delaware corporation for three years following the date such person became an interested stockholder unless (i) before such person became an interested stockholder, the board of directors of the corporation 48 approved the transaction in which the interested stockholder became an interested stockholder or approved the business combination, (ii) upon consummation of the transaction that resulted in the interested stockholder's becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding stock held by directors who are also officers of the corporation and by employee stock plans that do not provide employees with the rights to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer) or (iii) following the transaction in which such person became an interested stockholder, the business combination was approved by the board of directors of the corporation and authorized at a meeting of stockholders by the affirmative vote of the holders of 66 2/3% of the outstanding voting stock of the corporation not owned by the interested stockholder. Under Section 203, the restrictions described above also do not apply to certain business combinations proposed by an interested stockholder following the announcement or notification of one of certain extraordinary transactions involving the corporation and a person who had not been an interested stockholder during the previous three years or who became an interested stockholder with the approval of a majority of the corporation's directors, if such extraordinary transaction is approved or not opposed by a majority of the directors who were directors prior to any person becoming an interested stockholder during the previous three years or were recommended for election or elected to succeed such directors by a majority of such directors. OTHER MATTERS Delaware law authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breach of a director's fiduciary duty of care. The duty of care requires that, when acting on behalf of the corporation, directors must exercise an informed business judgment based on all material information reasonably available to them. Absent the limitations authorized by Delaware law, directors are accountable to corporations and their stockholders for monetary damages for conduct constituting gross negligence in the exercise of their duty of care. Delaware law enables corporations to limit available relief to equitable remedies such as injunction or rescission. The Certificate of Incorporation limits the liability of directors of the Company to the Company or its stockholders to the fullest extent permitted by Delaware law. Specifically, directors of the Company will not be personally liable for monetary damages for breach of a director's fiduciary duty as a director, except for liability for unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL. The inclusion of this provision in the Certificate of Incorporation may have the effect of reducing the likelihood of derivative litigation against directors and may discourage or deter stockholders or management from bringing a lawsuit against directors for breach of their duty of care, even though such an action, if successful, might otherwise have benefitted the Company and its stockholders. The Company's Bylaws provide indemnification to the Company's officers and directors and certain other persons with respect to certain matters. The Bylaws provide that, from and after the first date that the Company has received funding from the sale of capital stock in an initial public offering, the stockholders may act only at an annual or special meeting of stockholders and may not act by written consent. The Bylaws provide that special meetings of the stockholders can be called only by the Chairman of the Board, the Chief Executive Officer, the President or the Board of Directors. The Certificate of Incorporation provides that the Board of Directors shall consist of three classes of directors serving for staggered terms. As a result, it is currently contemplated that approximately one-third of the Company's Board of Directors will be elected each year. The classified board provision could prevent a party who acquires control of a majority of the outstanding voting stock of the Company from obtaining control of the Board of Directors until the second annual stockholders' meeting following the date the acquirer obtains the controlling interest. In addition, the Company's Bylaws provide that a 49 majority of the members of the Board of Directors must be licensed dentists affiliated with one of the Affiliated Practices. See "Management--Directors and Executive Officers." The Certificate of Incorporation provides that the number of directors shall be as specified in the Bylaws. The Bylaws provide that the number of directors shall be determined by the Board of Directors from time to time, but shall be at least one and not more than nineteen. It also provides that directors may be removed only for cause, and then only by the affirmative vote of the holders of at least a majority of all outstanding voting stock entitled to vote. This provision, in conjunction with the provision of the Bylaws authorizing the Board of Directors to fill vacant directorships, will prevent stockholders from removing incumbent directors without cause and filling the resulting vacancies with their own nominees. STOCKHOLDER PROPOSALS The Company's Bylaws contain provisions (i) requiring that advance notice be delivered to the Company of any business to be brought by a stockholder before an annual meeting of stockholders and (ii) establishing certain procedures to be followed by stockholders in nominating persons for election to the Board of Directors. Generally, such advance notice provisions provide that written notice must be given to the Secretary of the Company by a stockholder (i) in the event of business to be brought by a stockholder before an annual meeting, not less than 90 days nor more than 180 days prior to the earlier of the date of the meeting or the corresponding date on which the immediately preceding annual meeting of stockholders was held, and (ii) in the event of nominations of persons for election to the Board of Directors by any stockholder, (a) with respect to an election to be held at the annual meeting of stockholders, not less than 90 days nor more than 180 days prior to the earlier of the date of the meeting or the corresponding date on which the immediately preceding annual meeting of stockholders was held, and (b) with respect to an election to be held at a special meeting of stockholders for the election of directors, not later than the close of business on the 10th day following the day on which notice of the date of the special meeting was mailed to stockholders or public disclosure of the date of the special meeting was made, whichever first occurs. Such notice must set forth specific information regarding such stockholder and such business or director nominee, as described in the Company's Bylaws. The foregoing summary is qualified in its entirety by reference to the Company's Bylaws, which are included as an exhibit to the Registration Statement of which this Prospectus is a part. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for the Common Stock is Continental Stock Transfer & Trust Company. SHARES ELIGIBLE FOR FUTURE SALE Upon consummation of the Affiliations and the Offering, the Company will have outstanding 6,441,898 shares of Common Stock (6,816,898 if the Underwriters' over-allotment option is exercised in full) of which the 2,500,000 shares sold in the Offering (2,875,000 if the Underwriters' over-allotment option is exercised in full) will be freely tradable without restriction or further registration under the Securities Act, except for those held by "affiliates" (as defined in the Securities Act) of the Company, which shares will be subject to the resale limitations of Rule 144 under the Securities Act. The remaining 3,941,898 shares of Common Stock are deemed "restricted securities" under Rule 144 in that they were originally issued and sold by the Company in private transactions in reliance upon exemptions under the Securities Act, and may be publicly sold only if registered under the Securities Act or sold in accordance with an applicable exemption from registration, such as those provided by Rule 144 promulgated under the Securities Act as described below. In general, under Rule 144 as currently in effect, if a minimum of one year has elapsed since the date of acquisition of restricted securities from the issuer or from an affiliate of the issuer, the acquirer or 50 subsequent holder would be entitled to sell within any three-month period a number of those shares that does not exceed the greater of one percent of the number of shares of such class of stock then outstanding or the average weekly trading volume of the shares of such class of stock during the four calendar weeks preceding the filing of a Form 144 with respect to such sale. Sales under Rule 144 are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about the issuer. In addition, if a period of at least two years has elapsed since the later of the date of acquisition of restricted securities from the issuer or from any affiliate of the issuer, and the acquirer or subsequent holder thereof is deemed not to have been an affiliate of the issuer of such restricted securities at any time during the 90 days preceding a sale, such person would be entitled to sell such restricted securities under Rule 144(k) without regard to the requirements described above. Rule 144 does not require the same person to have held the securities for the applicable periods. The foregoing summary of Rule 144 is not intended to be a complete description thereof. The Commission has proposed certain amendments to Rule 144 that would, among other things, eliminate the manner of sale requirements and revise the notice provisions of that rule. The Commission has also solicited comments on other possible changes to Rule 144, including possible revisions to the one- and two-year holding periods and the volume limitations referred to above. As of September 30, 1997, options to purchase an aggregate of 671,667 shares of Common Stock were authorized for issuance under the Company's 1997 Stock Compensation Plan. See "Management--1997 Stock Compensation Plan." In general, pursuant to Rule 701 under the Securities Act, any employee, officer or director of, or consultant to, the Company who purchased his or her shares pursuant to a written compensatory plan or contract is entitled to rely on the resale provisions of Rule 701, which permit non-affiliates to sell such shares without compliance with the public information, holding period, volume limitation or notice provisions of Rule 144, and permit affiliates to sell such shares without compliance with the holding period provisions of Rule 144, in each case commencing 90 days after the date of this Prospectus. In addition, the Company intends to file a registration statement covering the 1,500,000 shares of Common Stock issuable upon exercise of stock options that may be granted in the future under the 1997 Stock Compensation Plan, in which case such shares of Common Stock generally will be freely tradable by non-affiliates in the public market without restriction under the Securities Act. The Company and its executive officers, directors and current stockholders have agreed not to offer for sale, sell, contract to sell, grant any option or other right for the sale of, or otherwise dispose of (or enter into any transaction or device which is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of Common Stock or any securities, indebtedness or other rights exercisable for or convertible or exchangeable into shares of Common Stock owned or acquired in the future in any manner prior to the expiration of 180 days after the date of this Prospectus (the "180-Day Lockup Period") without the prior written consent of Lehman Brothers Inc., except that the Company may, subject to certain conditions, issue shares of Common Stock in connection with future acquisitions and may grant Options or Awards (or issue shares of Common Stock upon exercise of Options or Awards) under the 1997 Stock Compensation Plan. These restrictions will be applicable to any shares acquired by any of those persons in the Offering or otherwise during the 180-Day Lockup Period. In addition, the Company's executive officers, directors and current stockholders and the persons acquiring shares of Common Stock in connection with the Affiliations have agreed with the Company that they generally will not sell, transfer or otherwise dispose of any of their shares for one year following the closing of the Offering. In connection with the Affiliations, the Company will enter into registration rights agreements with former stockholders of the Founding Affiliated Practices (the "Registration Rights Agreements"), which will provide certain registration rights with respect to the Common Stock issued to such stockholders in the Affiliations. Each Registration Rights Agreement will provide the holders of Common Stock subject to such agreement with the right to participate in registrations by the Company of its equity securities in underwritten offerings. The registration rights conferred by the Registration Rights Agreements will 51 terminate on the second anniversary of the closing of the Offering. The Company is generally required to pay the costs associated with such an offering, other than underwriting discounts and commissions and transfer taxes attributable to the shares sold on behalf of the selling stockholders. The Registration Rights Agreements provide that the number of shares of Common Stock to be registered on behalf of the selling stockholders is subject to limitation if the managing underwriter determines that market conditions require a limitation. Under the Registration Rights Agreements, the Company will indemnify the selling stockholders thereunder, and such stockholders will indemnify the Company against, certain liabilities in respect of any registration statement or offering covered by the Registration Rights Agreements. The Company and each of its current stockholders are parties to a stockholders agreement, which provides those stockholders registration rights substantially equivalent to the registration rights in the Registration Rights Agreements. Prior to the Offering, there has been no established public market for the Common Stock. No prediction can be made of the effect, if any, that sales of shares under Rule 144, or otherwise, or the availability of shares for sale will have on the market price of the Common Stock prevailing from time to time after the Offering. The Company is unable to estimate the number of shares that may be sold in the public market under Rule 144, or otherwise, because such amount will depend on the trading volume in, and market price for, the Common Stock and other factors. Nevertheless, sales of substantial amounts of shares in the public market, or the perception that such sales could occur, could adversely affect the market price of the Common Stock. See "Underwriting." Following the consummation of the Offering, the Company intends to register 1,500,000 shares of Common Stock under the Securities Act for use in connection with future acquisitions. These shares generally will be freely tradable after their issuance by persons not affiliated with the Company unless the Company contractually restricts their resale. Resales of any of those shares during the 180-Day Lockup Period would require the prior written consent of Lehman Brothers Inc. 52 UNDERWRITING Under the terms and subject to the conditions contained in an Underwriting Agreement dated the date of this Prospectus (the "Underwriting Agreement"), the underwriters named below (the "Underwriters"), for whom Lehman Brothers Inc. and Rauscher Pierce Refsnes, Inc. are acting as representatives (the "Representatives"), have severally agreed to purchase, and the Company has agreed to sell, the respective number of shares of Common Stock set forth opposite the name of each such Underwriter below:
NUMBER OF UNDERWRITERS SHARES - --------------------------------------------------------------------------------- ----------- Lehman Brothers Inc.............................................................. Rauscher Pierce Refsnes, Inc..................................................... ----------- Total........................................................................ 2,500,000 ----------- -----------
The Underwriting Agreement provides that the obligations of the Underwriters to purchase the shares of Common Stock are subject to certain conditions and that, if any of the foregoing shares of Common Stock are purchased by the Underwriters pursuant to the Underwriting Agreement, then all the shares of Common Stock agreed to be purchased by the Underwriters pursuant to the Underwriting Agreement must be so purchased. The Company has been advised by the Representatives that the Underwriters propose to offer the shares of Common Stock in part directly to the public at the public offering price set forth on the cover page of this Prospectus, and in part to certain dealers (who may include the Underwriters) at such public offering price, less a selling concession not in excess of $ per share. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per share to certain brokers or dealers. After the initial offering to the public, the public offering price, the concession to selected dealers and the reallowance may be changed by the Underwriters. The Company has granted the Underwriters an option to purchase up to 375,000 additional shares of Common Stock at the initial public offering price less the underwriting discounts and commissions shown on the cover page of this Prospectus, solely to cover over-allotments, if any. Such option may be exercised at any time until 30 days after the date of the Underwriting Agreement. To the extent that the option is exercised, each Underwriter will be committed, subject to certain conditions, to purchase a number of additional shares of Common Stock proportionate to such Underwriter's initial commitment as indicated in the preceding table. The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute, under certain circumstances, to payments that the Underwriters may be required to make in respect thereof. The Company and its executive officers, directors and current stockholders have agreed not to, directly or indirectly, offer for sale, sell, contract to sell, grant any option or other right for the sale of, or otherwise dispose of (or enter into any transaction or device which is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of Common Stock or any securities, indebtedness or other rights exercisable for or convertible or exchangeable into shares of Common Stock prior to the expiration of 180 days after the date of this Prospectus, without the prior written consent of Lehman Brothers Inc., except that the Company may, subject to certain conditions, issue shares of Common Stock in connection with future acquisitions and grant Options or Awards (or issue shares of Common Stock upon exercise of Options or Awards) under the 1997 Stock Compensation 53 Plan. For information respecting additional restrictions on sales by the Company's executive officers, directors, current stockholders and the persons acquiring shares of Common Stock in connection with the Affiliations, see "Shares Eligible for Future Sale." Prior to the Offering, there has been no public market for the Common Stock. The initial public offering price will be negotiated between the Company and the Representatives. Among the factors to be considered in determining the initial public offering price, in addition to prevailing market conditions, will be the history of and the prospects for the industry in which the Company competes, the past and present operations of the Founding Affiliated Practices, the historical results of operations of the Founding Affiliated Practices, the Company's capital structure, estimates of the business potential and earnings prospects of the Company, an overall assessment of the Company, an assessment of the Company's management and the consideration of the above factors in relation to market valuation of companies in related businesses. There can be no assurance that an active trading market will develop for the Common Stock or that the Common Stock will trade in the public market subsequent to the Offering at or above the initial public offering price. Until the distribution of the Common Stock is completed, rules of the Commission may limit the ability of the Underwriters and certain selling group members to bid for and purchase shares of Common Stock. As an exception to these rules, the Representatives are permitted to engage in certain transactions that stabilize the price of the Common Stock. Such transactions may consist of bids or purchases for the purposes of pegging, fixing or maintaining the price of the Common Stock. If the Underwriters over-allot (I.E., if they sell more shares of Common Stock than are set forth on the cover page of this Prospectus), and thereby create a short position in the Common Stock in connection with the Offering, the Representatives may reduce that short position by purchasing Common Stock in the open market. The Representatives also may elect to reduce any short position by exercising all or part of the over-allotment option described herein. The Representatives also may impose a penalty bid on certain Underwriters and selling group members. This means that, if the Representatives purchase shares of Common Stock in the open market to reduce the Underwriters' short position or to stabilize the price of the Common Stock, they may reclaim the amount of the selling concession from the Underwriters and selling group members who sold those shares as part of the Offering. In general, purchases of a security for the purpose of stabilization or to reduce a syndicate short position could cause the price of the security to be higher than it might otherwise be in the absence of such purchases. The imposition of a penalty bid might have an effect on the price of a security to the extent that it were to discourage resales of the security by purchasers in the Offering. Neither the Company nor any of the Underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Common Stock. In addition, neither the Company nor any of the Underwriters makes any representation that the Representatives will engage in such transactions or that such transactions, once commenced, will not be discontinued without notice. At the request of the Company, the Underwriters have reserved up to 125,000 of the shares of Common Stock offered hereby for sale at the initial public offering price to employees of the Company and other persons associated with the Company. The Representatives have informed the Company that the Underwriters do not intend to confirm sales of shares of Common Stock offered hereby to accounts over which they exercise discretionary authority. 54 LEGAL MATTERS The validity of the shares of Common Stock offered hereby will be passed upon for the Company by Jackson Walker L.L.P., Houston, Texas. Certain legal matters in connection with the sale of the Common Stock offered hereby will be passed upon for the Underwriters by Baker & Botts, L.L.P., Houston, Texas. EXPERTS The financial statements of Pentegra Dental Group, Inc. as of September 30, 1997 and for the period from inception, February 21, 1997, through September 30, 1997, as detailed in the index on page F-1, included in this Prospectus, have been audited by Coopers & Lybrand L.L.P., independent accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in accounting and auditing. ADDITIONAL INFORMATION The Company has filed with the Commission a Registration Statement on Form S-1 (together with all exhibits, schedules and amendments relating thereto, the "Registration Statement") with respect to the Common Stock offered hereby. This Prospectus, filed as part of the Registration Statement, does not contain all the information contained in the Registration Statement, certain portions of which have been omitted in accordance with the rules and regulations of the Commission. For further information with respect to the Company and the Common Stock offered hereby, reference is made to the Registration Statement including the exhibits and schedules thereto. Statements contained in this Prospectus as to the contents of any contract or other document filed as an exhibit to the Registration Statement accurately describe the material provisions of such document and are qualified in their entirety by reference to such exhibits for complete statements of their provisions. All of these documents may be inspected without charge at the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the following regional offices of the Commission: Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies can also be obtained from the Commission at prescribed rates. The Commission maintains a Web site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. 55 INDEX TO FINANCIAL STATEMENTS
PAGE --------- Pentegra Dental Group, Inc. Unaudited Pro Forma Balance Sheet.............................................. F-2 Unaudited Pro Forma Balance Sheet as of September 30, 1997............................................... F-3 Notes to Unaudited Pro Forma Balance Sheet............................................................... F-4 Pentegra Dental Group, Inc. Financial Statements Report of Independent Public Accountants................................................................. F-6 Balance Sheet as of September 30, 1997................................................................... F-7 Statement of Operations for the period from inception, February 21, 1997, through September 30, 1997.......................................................... F-8 Statement of Changes in Stockholders' Deficit for the period from inception, February 21, 1997, through September 30, 1997..................................................................................... F-9 Statement of Cash Flows for the period from inception, February 21, 1997, through September 30, 1997..... F-10 Notes to Financial Statements............................................................................ F-11
F-1 UNAUDITED PRO FORMA BALANCE SHEET The unaudited pro forma balance sheet dated September 30, 1997 of Pentegra Dental Group, Inc. (together with its parent entity, Pentegra Investments, Inc., "Pentegra" or the "Company") has been prepared as if (a) the acquisition by the Company of certain assets and assumption of certain liabilities of 50 dental practices (the "Founding Affiliated Practices") for consideration consisting of a combination of cash and shares of its common stock, par value $.001 per share (the "Common Stock"), and the execution of agreements to provide management services to the Founding Affiliated Practices (collectively, the "Affiliations"), (b) the repayment of certain debt of the Founding Affiliated Practices, (c) the acquisition by the Company (the "Pentegra/Napili Transaction") of certain assets of Pentegra, Ltd. and Napili, International ("Napili"), (d) the repurchase by Pentegra Investments, Inc. ("PII") of 245,845 shares of Class B Preferred Stock of PII from affiliates of the Company at the subscription price per share paid to PII for those shares and the redemption by PII of an aggregate of 1,337,500 shares of its Class A Preferred Stock and Class B Preferred Stock for $2.00 per share (the "Repurchase and Redemption"), (e) the exchange of all outstanding shares of common stock of PII for shares of Common Stock on a one-for-one basis (the "Share Exchange") (after giving effect to a repurchase by PII of shares of its common stock, at a purchase price of $.01 per share, such that the total number of shares of Common Stock issuable in connection with the Affiliations and the Share Exchange will not exceed 3,941,898 shares) and (f) the initial public offering of 2,500,000 shares of Common Stock (the "Offering") and the application of the net proceeds therefrom (as described in "Use of Proceeds, " except for the issuance and repayment of $350,000 aggregate principal amount outstanding under the Company's 9.5% promissory notes (the "Promissory Notes") which were issued in October and November of 1997), all had been completed, as if those transactions had occurred on September 30, 1997. The Affiliations, the repayment of certain debt of the Founding Affiliated Practices, the Pentegra/Napili Transaction, the Repurchase and Redemption, the Share Exchange and the Offering are each contingent on the occurrence of the others. The Company will not employ dental professionals or control the practice of dentistry by the dentists. As the Company will not be acquiring the future patient revenues to be earned by the Founding Affiliated Practices, the Affiliations are not deemed to be business combinations. In accordance with the Securities and Exchange Commission's Staff Accounting Bulletin No. 48, "Transfers of Nonmonetary Assets by Promoters or Shareholders," the Affiliations will be accounted for at their historical cost basis with the shares of Common Stock to be issued in the Affiliations being valued at the historical net book value of the nonmonetary assets acquired, net of liabilities assumed. The cash consideration will be reflected as a dividend by the Company to the owners of the Founding Affiliated Practices. The acquisition of certain assets of Pentegra, Ltd. and Napili will be accounted for as a purchase in accordance with Accounting Principles Board Opinion No. 16. The unaudited pro forma balance sheet has been prepared by the Company based on the audited historical financial statements of the Company, Pentegra, Ltd. and Napili included elsewhere in this Prospectus, including the audited combined financial information of the Founding Affiliated Practices included in the notes to the Company's financial statements, and assumptions deemed appropriate by the Company. The Company has not presented a pro forma statement of operations for the transactions described above based on the requirements set forth in Article 11 of Regulation S-X, because it is a newly formed entity with no significant operations to date and no operating history in the business of managing a large number of geographically diverse dental practices. F-2 PENTEGRA DENTAL GROUP, INC. UNAUDITED PRO FORMA BALANCE SHEET SEPTEMBER 30, 1997 (IN THOUSANDS)
TOTAL AFFILIATION OFFERING PRO FORMA, PENTEGRA ADJUSTMENTS SUBTOTAL ADJUSTMENTS AS ADJUSTED ----------- ------------- --------- ------------- ------------ ASSETS Current assets: Cash and cash equivalents....................... $ 354 $ -- $ 354 $ (6,367)(A) $ 9,471(1) 21,650(B) (200)(C) (2,789)(D) (2,749 (E) (428 (F) Accounts receivable, net........................ -- -- -- 554 (F) 554 ----------- ------------- --------- ------------- ------------ Total current assets.......................... 354 -- 354 9,671 10,025 Property and equipment, net....................... 69 2,698 (A) 2,767 17 (C) 2,784 Deferred offering costs........................... 1,643 -- 1,643 (1,643 (B) -- Other noncurrent assets, net...................... 5 -- 5 183 (C) 188 ----------- ------------- --------- ------------- ------------ Total assets.................................. $ 2,071 $ 2,698 $ 4,769 $ 8,228 $ 12,997 ----------- ------------- --------- ------------- ------------ ----------- ------------- --------- ------------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable and accrued liabilities........ $ 1,006 $ 6,367 (A) $ 7,373 $ (6,367 (A) $ 1,439 (943 (B) 126 (F) 1,250 (G) Current portion of long-term debt............... -- 746 (A) 746 (746 (E) -- ----------- ------------- --------- ------------- ------------ Total current liabilities..................... 1,006 7,113 8,119 (6,680 ) 1,439 Long-term debt.................................... -- 2,003 (A) 2,003 (2,003 (E) -- Class A redeemable preferred stock................ 675 -- 675 (675 (D) -- Class B redeemable preferred stock................ 414 -- 414 (414 (D) -- Stockholders' equity (deficit): Common stock.................................... 18 2 (A) 20 3 (B) 6 (17 (H) Additional paid-in capital...................... 708 (6,420 (A) (5,712) 20,947 (B) 13,552 (1,700 (D) 17 (H) Accumulated deficit............................. (750 ) -- (750) (1,250 (G) (2,000 ) ----------- ------------- --------- ------------- ------------ Total stockholders' equity (deficit).......... (24 ) (6,418 ) (6,442) 18,000 11,558 ----------- ------------- --------- ------------- ------------ Total liabilities and stockholders' equity (deficit)................................... $ 2,071 $ 2,698 $ 4,769 $ 8,228 $ 12,997 ----------- ------------- --------- ------------- ------------ ----------- ------------- --------- ------------- ------------
- ---------- (1) See "Use of Proceeds." The accompanying notes are an integral part of this unaudited pro forma financial statement. F-3 PENTEGRA DENTAL GROUP, INC. NOTES TO UNAUDITED PRO FORMA BALANCE SHEET The accompanying unaudited pro forma balance sheet as of September 30, 1997 gives effect to the Affiliations, the payment of debt assumed from the Founding Affiliated Practices, the Pentegra/Napili Transaction, the Repurchase and Redemption, the Share Exchange and the Offering and the application of the proceeds therefrom (as described in "Use of Proceeds," except for the issuance and repayment of $350,000 aggregate principal amount outstanding under the Promissory Notes, which were issued in October and November 1997), as if those transactions had occurred on September 30, 1997. The unaudited pro forma balance sheet does not represent the historical or future financial position of the Company. (A) Reflects completion of the Affiliations, which will involve (i) the issuance of 2,622,269 shares of Common Stock, valued at the historical net book value of the assets transferred less the liabilities assumed, and (ii) cash distributions to be treated as dividends aggregating $6,367,000. The historical net book value of the assets transferred and the liabilities assumed from the Founding Affiliated Practices are as follows (in thousands):
Property and equipment transferred.................................................. $ 2,698 Less Current portion of notes payable.................................................. (746) Long-term portion of notes payable................................................ (2,003) --------- Liabilities assumed, net of assets transferred.................................. $ (51) --------- ---------
Certain assets and liabilities will not be transferred from the Founding Affiliated Practices. The assets not transferred are cash, certain accounts receivable, prepaids and other current assets, and certain accounts payable. (B) Reflects the issuance of 2,500,000 shares Common Stock in the Offering, net of (i) estimated underwriters' discounts and commissions and (ii) estimated offering costs of $2,300,000 primarily consisting of legal, accounting and printing expenses, less offering costs previously funded with proceeds from the issuance of capital stock of PII, including all PII Class A Preferred Stock and Class B Preferred Stock, and the Promissory Notes. The resulting net proceeds are reflected as Common Stock and additional paid-in capital. The Company has deferred offering costs of $1,643,000, of which $700,000 had been paid at September 30, 1997. (C) Reflects completion of the Pentegra/Napili Transaction for consideration of $200,000 cash. As of September 30, 1997, the assets to be acquired in the Pentegra/Napili Transaction have a fair value of approximately $17,000. The cost in excess of the fair value of the net tangible assets acquired will be amortized over a five-year period. (D) Reflects the repurchase of 245,835 shares of Class B Preferred Stock from affiliates of the Company at the price per share paid to PII for those shares and the redemption of an aggregate of 1,337,500 shares of Class A Preferred Stock and Class B Preferred Stock for $2.00 per share and recognition of F-4 PENTEGRA DENTAL GROUP, INC. NOTES TO UNAUDITED PRO FORMA BALANCE SHEET the related deemed dividend of $1,700,000. The cash payment for the Repurchase and Redemption and dividend are as follows (in thousands): Cash payment for Repurchase......................................... 114 Cash payment for Redemption......................................... 2,675 --------- 2,789 Less Value of Class A and B preferred stock at September 30, 1997...... 1,089 --------- Dividend to Class A and B preferred stockholders.................. $ 1,700 --------- ---------
(E) Reflects the use of proceeds from the Offering to repay the debt assumed in the Affiliations. (F) Reflects the purchase of net monetary assets from the Founding Affiliated Practices for cash of $428,000, which assets will be recorded at fair value. The fair value of the net assets purchased are as follows (in thousands): Accounts receivable, net............................................. $ 554 Less Accounts payable................................................... (126) --------- Total................................................................ $ 428 --------- ---------
(G) Reflects the accrual of an employment bonus of $1,250,000 to the Chairman of the Board of Directors (the "Chairman"). Payment of the bonus will be made in increments of $10,000 on the closing of each future dental practice affiliation until the bonus has been paid in full. Management expects the bonus will be paid within the year following the Offering. In any event, pursuant to the terms of the Company's employment agreement with the Chairman, the employment bonus must be paid in full within three years of the Offering. The bonus will be expensed in the fourth quarter of 1997 because its payment is not contingent on future services actually being provided by the Chairman. (H) Reflects repurchase by PII of 437,038 shares of its common stock and the exchange at the closing of the offering of 1,319,629 shares of $0.001 par value common stock of Pentegra Dental Group, Inc. for 1,319,629 shares of $0.01 par value common stock of PII. F-5 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Pentegra Dental Group, Inc.: We have audited the accompanying balance sheet of Pentegra Dental Group, Inc. as of September 30, 1997, and the related statements of operations, changes in stockholders' deficit, and cash flows for the period from inception, February 21, 1997, through September 30, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pentegra Dental Group, Inc. as of September 30, 1997, and the results of its operations and its cash flows for the period from inception, February 21, 1997, through September 30, 1997 in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Houston, Texas December 10, 1997 F-6 PENTEGRA DENTAL GROUP, INC. BALANCE SHEET SEPTEMBER 30, 1997 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) ASSETS Current assets: Cash and cash equivalents......................................................... $ 354 --------- Total current assets............................................................ 354 --------- Property and equipment.............................................................. 69 Deferred offering costs............................................................. 1,643 Organizational costs................................................................ 5 --------- Total assets................................................................ $ 2,071 --------- --------- LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable and accrued liabilities.......................................... $ 1,006 --------- Total current liabilities....................................................... 1,006 --------- Commitments and contingencies (See Notes)........................................... Class A redeemable preferred stock, $0.01 par value, 5,000,000 shares authorized, 900,000 shares issued and outstanding (liquidation preference of $900)............ 675 Class B redeemable preferred stock, $0.01 par value, 5,000,000 shares authorized, 683,335 shares issued and outstanding (liquidation preference of $683)............ 414 Stockholders' deficit: Common stock, $0.01 par value, 40,000,000 shares authorized, 1,756,667 shares issued and outstanding.......................................................... 18 Additional paid-in capital.......................................................... 708 Accumulated deficit................................................................. (750) --------- Total stockholders' deficit..................................................... (24) --------- Total liabilities and stockholders' deficit................................. $ 2,071 --------- ---------
The accompanying notes are an integral part of the financial statements. F-7 PENTEGRA DENTAL GROUP, INC. STATEMENT OF OPERATIONS FOR THE PERIOD FROM INCEPTION, FEBRUARY 21, 1997, THROUGH SEPTEMBER 30, 1997 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Revenue............................................................................. $ -- Expenses: General and administrative expenses............................................... 411 Compensation expense in connection with issuance of common stock.................. 339 --------- Total expenses................................................................ 750 --------- Net loss............................................................................ $ (750) --------- ---------
The accompanying notes are an integral part of the financial statements. F-8 PENTEGRA DENTAL GROUP, INC. STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT FOR THE PERIOD FROM INCEPTION, FEBRUARY 21, 1997, THROUGH SEPTEMBER 30, 1997 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
COMMON STOCK ADDITIONAL TOTAL ------------------------ PAID-IN ACCUMULATED STOCKHOLDERS' SHARES AMOUNT CAPITAL DEFICIT DEFICIT ----------- ----------- ------------- ------------- ------------- Balance at February 21, 1997........................... -- $ -- $ -- $ -- $ -- Issuance of common stock ($0.01 per share cash on February 21, 1997).......... 667 7 3 -- 10 Issuance of common stock ($0.01 per share cash and $0.14 per share compensation on May 22, 1997)........................ 767 8 107 -- 115 Issuance of common stock ($1.27 per share cash on June 13, 1997).............. 290 3 365 -- 368 Issuance of common stock ($0.01 per share cash and $1.26 per share compensation on June 13, 1997)....................... 33 -- 42 -- 42 Purchases of common stock.............................. (67) (1) -- -- (1) Issuance of common stock ($0.01 per share cash and $2.87 per share compensation on September 1, 1997)... 67 1 191 -- 192 Net loss............................................... -- -- -- (750) (750) ----- ----- ----- ----- ----- Balance at June 30, 1997............................... 1,757 $ 18 $ 708 $ (750) $ (24) ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
The accompanying notes are an integral part of the financial statements. F-9 PENTEGRA DENTAL GROUP, INC. STATEMENT OF CASH FLOWS FOR THE PERIOD FROM INCEPTION, FEBRUARY 21, 1997, THROUGH SEPTEMBER 30, 1997 (IN THOUSANDS)
Cash flows from operating activities: Net loss.......................................................................... $ (750) Compensation associated with issuance of common stock............................. 339 Increase in accounts payable and accrued liabilities.............................. 63 --------- Net cash used by operating activities......................................... (348) --------- Net cash used in investing activities--additions to property and equipment.......... (69) --------- Cash flows provided by financing activities: Proceeds from issuance of common and preferred stock.............................. 1,476 Offering costs.................................................................... (700) Organizational costs.............................................................. (5) --------- Net cash provided by financing activities..................................... 771 --------- Net increase in cash and cash equivalents........................................... 354 Balance at inception, February 21, 1997............................................. -- --------- Balance at September 30, 1997....................................................... $ 354 --------- --------- Non-cash financing activities: Offering costs accrued............................................................ $ 943 --------- ---------
The accompanying notes are an integral part of the financial statements. F-10 PENTEGRA DENTAL GROUP, INC. NOTES TO FINANCIAL STATEMENTS 1. BUSINESS AND ORGANIZATION: Pentegra Dental Group, Inc. (the "Company") was organized as a Delaware corporation on February 21, 1997, for the purpose of creating a dental practice management company. In July 1997, the Company changed its name to Pentegra Investments, Inc. and formed a new wholly owned subsidiary named Pentegra Dental Group, Inc. ("Pentegra Dental"). Pentegra Dental's operations to date have consisted primarily of seeking affiliations with dental practices, negotiating to acquire the tangible assets of those practices, and negotiating agreements to provide management services to those practices. Pentegra Dental plans to complete an initial public offering of its common stock, par value $0.001 per share (the "Offering") and simultaneously exchange cash and shares of its common stock for selected assets and liabilities (the "Affiliations") of 50 dental practices (the "Founding Affiliated Practices" and, together with dental practices with which the Company may enter into similar transactions in the future, the "Affiliated Practices") (see Note 4). Additionally, the current shareholders will exchange on a share-for-share basis, all of their shares of the Company's common stock, par value $0.01 per share, for shares of common stock of Pentegra Dental. It is contemplated that 245,835 shares of Class B preferred stock held by affiliates of the Company will be repurchased at their original issuance prices ranging from $0.01 to $1.00 per share and 1,337,500 shares of Class A and Class B preferred stock held by nonaffiliates will be redeemed at a price of $2.00 per share with the proceeds of the Offering. Pentegra Dental has also entered into an agreement to acquire substantially all the assets and operations of a dental management consulting firm, Pentegra, Ltd., and a dental management seminar company, Napili, International (the "Pentegra/Napili Transaction") (see Note 3). The Affiliations, the Pentegra/Napili Transaction and the Offering are each contingent on the occurrence of the others. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: CASH AND CASH EQUIVALENTS Cash and cash equivalents are defined as highly liquid financial instruments with maturities of three months or less at the date of purchase. DEFERRED OFFERING COSTS Deferred offering costs include legal, accounting and other costs directly related to the Offering. All deferred offering costs will be charged against the proceeds of the Offering upon its completion. Such costs would be charged to expense if the Offering were not completed. ORGANIZATIONAL COSTS Organizational costs are being amortized on a straight-line basis over a five-year period. STOCK OPTION PLAN In September 1997, the board of directors of Pentegra Dental adopted the 1997 Stock Compensation Plan (the "Plan"). Employees, non-employee directors and advisors and directors will be eligible to receive awards under the Plan and only employees of the Company will be eligible to receive incentive stock options. The aggregate number of options to purchase shares of common stock and other awards of shares of common stock that may be granted under the Plan may not exceed 2,000,000 shares. As of September 30, 1997, Pentegra Dental had authorized for issuance options to acquire approximately 647,000 shares to employees, practice employees and directors on the date the initial public offering price is determined. F-11 PENTEGRA DENTAL GROUP, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) The exercise price of these options will be the initial public offering price per share. The Company has adopted Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," which establishes accounting and reporting standards for stock-based compensation plans. The Company will account for options issued to employees and non-employee directors under the Plan in accordance with APB Opinion No. 25 and provide disclosure of the pro forma effect of using the fair value of options granted to employees to measure compensation. Of the amounts authorized as of September 30, 1997, options to purchase approximately 57,000 shares will be issued to owners of Founding Affiliated Practices, practice employees and other advisors. The fair value of such options will be charged to operations over their vesting period. EARNINGS PER SHARE Earnings per share has been excluded from the financial statements because the Company has limited historical operations and does not have a significant operating history. USE OF ESTIMATES The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may in some instances differ from previously estimated amounts. INCOME TAXES The Company utilizes the liability method of accounting for income taxes. Under this method, deferred taxes are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted marginal tax rates currently in effect when the differences reverse. As reflected in the accompanying statement of operations, the Company incurred a net loss of $750,000 during the period from inception, February 21, 1997, through September 30, 1997. The Company has recognized no tax benefit from this net loss. Due to the limited operations of the Company since its inception, a valuation allowance has been established to offset the deferred tax asset related to these net losses that have been capitalized for tax purposes. There is no other significant difference in the tax and book bases of the Company's assets or liabilities that would give rise to deferred tax balances. RECENT PRONOUNCEMENTS In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 128, "Earnings Per Share." SFAS No. 128 specifies the computation, presentation, and disclosure requirements of earnings per share and supersedes Accounting Principles Board Opinion No. 15, "Earnings Per Share." SFAS No. 128 requires a dual presentation of basic and diluted earnings per share. Basic earnings per share, which excludes the impact of common stock equivalents, replaces primary earnings per share. Diluted earnings per share, which utilizes the average market price per share as opposed to the greater of the average market price per share or ending market price per share when applying the treasury stock F-12 PENTEGRA DENTAL GROUP, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) method in determining common stock equivalents, replaces fully diluted earnings per share. SFAS No. 128 is effective for both interim and annual periods ending after December 15, 1997. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information." SFAS No. 130 establishes standards for reporting and displaying comprehensive income and its components in a full set of general purpose financial statements. SFAS No. 131 establishes standards for reporting segment information by public enterprises in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports to shareholders. Both these statements are effective for fiscal years beginning after December 15, 1997. The Company believes implementation of SFAS Nos. 130 and 131 will not have a material effect on its financial position, results of operations or cash flows. The Emerging Issues Task Force of the FASB is currently evaluating certain matters relating to the physician practice management industry, which the Company expects will include a review of accounting for affiliated dental practices. The Company is unable to predict the impact, if any, that this review may have on Pentegra Dental's financial statement presentation. 3. RELATED PARTY TRANSACTIONS: Pentegra Dental has entered into an agreement with the Chairman of its Board of Directors effective at the date the Offering closes, to purchase substantially all the assets and the operations of Pentegra, Ltd. and Napili, International for cash consideration of $200,000. Pentegra Dental will enter into an employment agreement in the fourth quarter of 1997, that provides for the payment to the Chairman of the Board of Directors of an employment bonus of $1,250,000. The bonus is due in installments of $10,000 on the closing of each future dental practice affiliation subsequent to the Affiliations. However, the bonus must be paid in full within three years. The employment bonus will be charged to operations in the fourth quarter of 1997 because its payment is not contingent on any future services to be provided by the Chairman. Since the Company's inception, it has occupied and had access to the facilities, equipment and staff of a relative of an executive officer and director of the Company. Prior to June 1, 1997, that use was insignificant. Effective June 1, 1997, the Company has agreed to compensate the affiliate for use of and access to its office facilities, equipment and staff at the rate of $10,000 per month. The Company has agreed to lease a portion of the office facilities, equipment and staff of Pentegra, Ltd., which is wholly owned by the Company's Chairman of the Board. The Company has agreed to compensate Pentegra, Ltd. for use of and access to its office facilities, equipment and staff at the rate of $11,000 per month until the Pentegra/Napili Transaction is completed, whereupon the entire lease of those facilities will be assumed by Pentegra Dental. The Company believes that the compensation being paid to these related parties represents the fair market value of the services that are being provided to the Company. 4. PLANNED TRANSACTIONS: Pentegra Dental plans to complete the Affiliations through a series of mergers and asset transfers. Owners of the Founding Affiliated Practices (the "Promoters") will receive shares of Common Stock having a value of approximately $26.2 million, based on the initial public offering price (2,622,269 shares of F-13 PENTEGRA DENTAL GROUP, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. PLANNED TRANSACTIONS: (CONTINUED) Common Stock, based on an assumed initial public offering price of $10.00 per share), and approximately $6,400,000 in cash. In December 1997, the owners of the outstanding shares of common stock of PII agreed that, in the event the initial public offering price is less than $12.00 per share, PII will repurchase from those stockholders, on a pro rata basis, at a purchase price of $.01 per share, that number of shares as will be necessary so that the aggregate number of shares of Common Stock issuable in connection with the Affiliations and the Share Exchange will not exceed 3,941,898 shares. Pursuant to that agreement, assuming an initial public offering price of $10.00 per share, PII would repurchase approximately 24.9% of each such stockholder's shares of PII common stock, or an aggregate of 437,038 shares. Each Founding Affiliated Practice transaction was individually negotiated between the Company and the Founding Affiliated Practice as to all material terms, including, but not limited to, valuation. The shares to be issued were based on a common allocation method that considered each Founding Affiliated Practice's gross revenue, net of certain operating expenses, and the Company's assessment of growth potential. No independent appraisals of the Founding Affiliated Practices were obtained. Of the total consideration for each transaction, each Founding Affiliated Practice could elect to receive up to 20% in cash and the balance in shares of Common Stock. The actual number of shares will be calculated by subtracting the cash portion from the total consideration and dividing the resulting amount by the initial public offering price per share. The assets to be transferred in the Affiliations include supplies inventory, equipment and certain other current and non-current assets. The liabilities to be transferred primarily consist of long-term debt. In connection with the Affiliations, the Promoters and their professional corporations, professional associations or other entities (collectively, the "PCs") will enter into long-term service agreements with Pentegra Dental (the "Service Agreements"). Additionally, those Promoters will enter into employment and noncompete agreements with their respective PCs. Pentegra Dental will not employ dentists or control the practice of dentistry by the dentists employed by the PCs. As Pentegra Dental will be executing management service agreements and will not hold any equity ownership in the PCs, the Affiliations are deemed not to be business combinations. Because each of the owners of the Founding Affiliated Practices is a promoter of the Offering, Securities and Exchange Commission's Staff Accounting Bulletin No. 48, "Transfers of Nonmonetary Assets by Promoters or Shareholders" requires (i) the transferred nonmonetary assets to be accounted for at the historical cost basis of the Founding Affiliated Practices, (ii) any monetary assets and assumed monetary liabilities included in the Affiliations to be recorded at fair value and (iii) cash consideration paid and assumed liabilities in excess of net assets transferred, to be reflected as a dividend paid by Pentegra Dental. The information set forth below assumes all the Founding Affiliated Practices will participate in the Affiliations. Although management expects that all the practices will participate, there is no assurance that will be the case. F-14 PENTEGRA DENTAL GROUP, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. PLANNED TRANSACTIONS: (CONTINUED) The net assets to be transferred and liabilities to be assumed from the Founding Affiliated Practices are summarized, on a combined basis, in the following table (in thousands):
DECEMBER 31, 1996 ------------ SEPTEMBER 30, 1997 ------------- (UNAUDITED) Property, equipment and improvements, net....................... 2,912 2,698 ------------ ------------- Assets transferred............................................ 2,912 2,698 Current portion of notes payable................................ (1,078) (746) Long-term portion of notes payable.............................. (1,411) (2,003) ------------ ------------- Net assets transferred, net of liabilities assumed............ $ 423 $ (51) ------------ ------------- ------------ -------------
The Company will also purchase certain net monetary assets from the founding Affiliated Practices for a cash amount of $428,000. The net assets purchased will be recorded at their fair value as of September 30, 1997. The fair value of the net monetary assets to be acquired as of September 30, 1997 was as follows (in thousands):
Accounts receivable, net....................................... $ 554 Less accounts payable.......................................... (126) ----- Net monetary assets to be acquired........................... $ 428 ----- -----
Upon consummation of the Affiliations, Pentegra Dental will enter into a Service Agreement with each Founding Affiliated Practice under which Pentegra Dental will become the exclusive manager and administrator of non-dental services relating to the operation of the Founding Affiliated Practices. The actual terms of the various Service Agreements vary from the description below on a case-by-case basis, depending on negotiations with the individual Founding Affiliated Practices and the requirements of applicable law and governmental regulations. The management service revenues that will be earned by Pentegra Dental subsequent to the closing of the Affiliations and the execution of the Service Agreements will be based on various arrangements. In general, the resulting fee will be based primarily on the patient revenues less operating expenses associated with each PC excluding dentists' salaries and depreciation. Patient revenues are determined based on net patient revenues, as determined under generally accepted accounting principles, including adjustments for contractual allowances and other discounts, less an adjustment for uncollectable accounts. The Company will pay all operating expenses incurred by each Affiliated Practice that are required to operate a dental office, and the Affiliated Practice will be responsible for reimbursing the Company for such expenses. These expenses will include the following: - Salaries, benefits, payroll taxes, workers compensation, health insurance and other benefit plans, and other direct expenses of all employees of the Company at each location of the Affiliated Practice, excluding those costs associated with the dentists and any other classification of employee which the Company is prohibited from employing by law; - Direct costs of all employees or consultants that provide services to each location of the Affiliated Practice; - Dental and office supplies, as permitted by law; F-15 PENTEGRA DENTAL GROUP, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. PLANNED TRANSACTIONS: (CONTINUED) - Lease or rent payments, as permitted by law, and utilities, telephone and maintenance expenses for practice facilities; - Property taxes on the Company's assets located at the Affiliated Practice's offices; - Property, casualty, liability and malpractice insurance premiums relating to the operations of the Affiliated Practice; - Dentist recruiting expenses relating to the operations of the Affiliated Practice; and - Advertising and other marketing costs attributable to the promotion of the Affiliated Practice's offices. All of the above expenses will be incurred and paid by the Company directly to the third-party provider of the goods or services indicated. In exchange for incurring these expenses and providing management services, the Company will record revenues in amounts equal to those incurred expenses, which the Affiliated Practice will reimburse to the Company, together with a service fee based on the type of Service Agreement entered into by the Affiliated Practice. The Founding Affiliated Practices will retain responsibility for the payment of any and all direct employment expenses, including benefits, for any dentist or other employee that the Company is prohibited from employing by law. The Company's standard form of Service Agreement (the "Standard Contract") will be applied to all practices operating in jurisdictions where permitted. In those instances where the Standard Contract may not be permitted by applicable law, an alternative form of Service Agreement (the "Alternative Contract") will be used. In any jurisdiction where neither the Standard Contract nor the Alternative Contract is permitted, the service fee will be based on a fixed fee (the "fixed-fee agreements") that will be subject to annual renegotiation or adjustment. The patient revenues and operating expenses (excluding depreciation and dentists' salaries) of the Founding Affiliated Practices are summarized, on a combined basis, in the following tables for the year ended December 31, 1996 and the nine months ended September 30, 1997 (in thousands):
YEAR ENDED DECEMBER 31, 1996 ---------------------- PATIENT OPERATING REVENUES EXPENSES --------- ----------- Practices participating under the Standard Contract..................... $ 29,233 $ 17,420 Practices participating under the Alternative Contract.................. 6,059 4,269 Practices participating under fixed-fee agreements...................... 2,599 1,393 --------- ----------- Totals for Founding Affiliated Practices................................ $ 37,891 $ 23,082 --------- ----------- --------- ----------- NINE MONTHS ENDED SEPTEMBER 30, 1997 ---------------------- PATIENT OPERATING REVENUES EXPENSES --------- ----------- (UNAUDITED) Practices participating under the Standard Contract..................... $ 22,153 $ 12,535 Practices participating under the Alternative Contract.................. 4,958 3,617 Practices participating under fixed-fee agreements...................... 1,893 1,112 --------- ----------- Totals for Founding Affiliated Practices................................ $ 29,004 $ 17,264 --------- ----------- --------- -----------
F-16 PENTEGRA DENTAL GROUP, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. PLANNED TRANSACTIONS: (CONTINUED) Subsequent to the Affiliations, the operating expenses of the Founding Affiliated Practices (excluding dentists' salaries) will be paid by Pentegra Dental and billed to the PCs. The historical operating expenses of the Founding Affiliated Practices for the year ended December 31, 1996 and the nine months ended September 30, 1997 that will be assumed by Pentegra Dental excluding those employment expenses for any dentist or other employee that the Company is prohibited from employing by law, in the future are summarized, on a combined basis, in the following table (in thousands):
YEAR ENDED DECEMBER 31, 1996 ------------ NINE MONTHS ENDED SEPTEMBER 30, 1997 ------------- (UNAUDITED) Salaries, wages and benefits of employees, excluding the dentists...................................................... $ 8,495 $ 6,432 Dental supplies................................................. 5,680 4,340 Rent............................................................ 1,884 1,395 Advertising and marketing expenses.............................. 567 400 General and administrative expenses............................. 5,716 4,116 Other expenses.................................................. 740 581 ------------ ------------- Total operating expenses.................................... 23,082 17,264 Depreciation and amortization................................... 879 699 ------------ ------------- Total expenses.............................................. $ 23,961 $ 17,963 ------------ ------------- ------------ -------------
The Company will continue to recognize depreciation and amortization on assets transferred in connection with the Affiliations. However, such charges are not considered operating expenses under the Service Agreements and will not enter into the calculation of the service fees. The combined historical financial information of the Founding Affiliated Practices presented herein is not related to the financial position or results of operations of Pentegra Dental or the Company. This information is presented solely for the purpose of providing disclosures to potential investors regarding the group of entities with which Pentegra Dental will be contracting to provide future services. The Founding Affiliated Practices were not operated under common control or management during the fiscal year ended December 31, 1996 or the nine months ended September 30, 1997. 5. REDEEMABLE PREFERRED STOCK In May 1997, the Company authorized the designation, out of the authorized and unissued preferred stock, of two classes of 5,000,000 shares each, designated as "Class A" and "Class B." In May 1997, the Company issued 133,335 shares of Class B nonvoting preferred stock for cash of approximately $1,000. In June 1997, the Company issued 900,000 shares of Class A nonvoting preferred stock, 550,000 shares of Class B nonvoting preferred stock and 435,000 shares of common stock for $1,457,000. The Company allocated $675,000 of the proceeds to the Class A preferred stock, $413,000 to the Class B preferred stock and $369,000 to the common stock based on the value of $0.75, $0.75 and $0.85 per share, respectively, as determined by an independent valuation of the fair value of those shares as of the date of issuance. The proceeds from these stock issuances were reserved for legal and accounting costs associated with the Offering, as well as operating costs. Holders of both classes of preferred stock are entitled to per share dividends equivalent to any dividends that may be declared on the common stock, but not to cumulative F-17 PENTEGRA DENTAL GROUP, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) 5. REDEEMABLE PREFERRED STOCK (CONTINUED) dividends. The preferred stock entitles the holders thereof to preference in liquidation over the common stock. The Company will repurchase 245,835 shares of its Class B preferred stock held by affiliates of the Company at repurchase prices equal to the subscription prices, which ranged from $0.01 to $1.00 per share (aggregating to $114,000), and the remaining 1,337,500 shares of Class A and B preferred stock outstanding will be redeemed at a price of $2.00 per share (aggregating to $2,675,000) with a portion of the net proceeds of the Offering. The value of the preferred stock has not been accreted to the redemption value because the date of the Offering was not determinable at December 10, 1997. The Company will recognize a dividend at the date of redemption. 6. COMMON STOCK All share information in the accompanying financial statements have been retroactively restated to reflect a two-for-three share reverse stock split of the Company's common stock, which was effected in October 1997. In February 1997, the Company issued 666,667 shares of common stock for cash at a price of $0.01 per share. The Company issued an additional 766,667 shares of common stock to members of management during May 1997 for cash at a price of $0.01 per share. The Company valued these shares at $0.15 per share, based on an independent valuation of the fair value of those shares as of the date of issuance. In June 1997, in addition to the 290,000 shares of common stock issued in connection with the issuance of the Class A and Class B preferred stock, described in Note 5 above, the Company issued 33,333 shares of common stock for cash at a price of $0.01 per share. Those shares were valued at $1.27 per share, based on an independent valuation of the fair value of those shares as of the date of issuance. In September 1997, the Company repurchased 66,667 shares of its common stock at a purchase price of $0.01 per share, of which 46,667 shares were repurchased from a director of the Company. The Company issued 66,667 shares of common stock to a member of management at a purchase price of $0.01 per share. Those shares were valued at $2.88 per share, based on an independent valuation of the fair value of those shares as of the date of issuance. The differences between the cash received for shares of common stock and the fair value of those shares as of the respective dates of issuance have been recognized as compensation expense. 7. SUBSEQUENT EVENTS In October 1997, the Company repurchased an additional 20,000 shares of its common stock from a director at a purchase price per share of $0.01, and issued (i) 20,000 shares of common stock for a purchase price of $0.01 and (ii) $300,000 of 9.5% promissory notes due on the earlier of 30 days after the closing of the Offering or October 1998. The Company will record the value of the shares based on an independent valuation of those shares as of the date of issuance. The difference between the cash received for those shares of common stock and the fair value of those shares will be recognized as a discount on the promissory notes. The Company will accrete the discount over the term of the promissory notes. In November 1997, the Company authorized (i) options to purchase 25,000 shares of common stock at the Offering price per share (bringing the total number of shares subject to options authorized through November 1997 to approximately 672,000) and (ii) the issuance of an additional $50,000 of 9.5% promissory notes due on the earlier of 30 days after the closing of the Offering or November 1998. F-18 - --------------------------------------------------------- --------------------------------------------------------- - --------------------------------------------------------- --------------------------------------------------------- NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED ON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SHARES OF COMMON STOCK TO WHICH IT RELATES OR ANY OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO ITS DATE. --------------------- TABLE OF CONTENTS
PAGE ----- Prospectus Summary................................ 3 Risk Factors...................................... 8 The Company....................................... 16 Use of Proceeds................................... 17 Dividend Policy................................... 17 Dilution.......................................... 18 Capitalization.................................... 19 Selected Financial Data........................... 20 Management's Discussion and Analysis of Financial Condition and Results of Operations............. 21 Business.......................................... 26 Management........................................ 36 Certain Transactions.............................. 43 Security Ownership of Certain Beneficial Owners and Management.................................. 47 Description of Capital Stock...................... 48 Shares Eligible for Future Sale................... 50 Underwriting...................................... 53 Legal Matters..................................... 55 Experts........................................... 55 Additional Information............................ 55 Index to Financial Statements..................... F-1
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. 2,500,000 SHARES PENTEGRA DENTAL GROUP, INC. COMMON STOCK ------------------- PROSPECTUS , 1998 --------------------- LEHMAN BROTHERS RAUSHER PIERCE REFSNES, INC. - --------------------------------------------------------- --------------------------------------------------------- - --------------------------------------------------------- --------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the expenses to be paid by the Company (other than underwriting compensation expected to be incurred) in connection with the offering described in this Registration Statement. All amounts are estimates, except the SEC Registration Fee, the NASD Filing Fee and the American Stock Exchange. SEC Registration Fee............................................ $ 12,197 NASD Filing Fee................................................. 4,525 American Stock Exchange Listing Fee............................. 35,000 Blue Sky Fees and Expenses...................................... 10,000 Printing Costs.................................................. 150,000 Legal Fees and Expenses......................................... 350,000 Accounting Fees and Expenses.................................... 1,600,000 Transfer Agent and Registrar Fees and Expenses.................. 5,000 --------- Miscellaneous................................................... 133,278 --------- Total......................................................... $2,300,000 --------- ---------
- --------- * To be provided by amendment. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. DELAWARE GENERAL CORPORATION LAW Section 145(a) of the General Corporation Law of the State of Delaware (the "DGCL") provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person's conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person's conduct was unlawful. Section 145(b) of the DGCL states that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good II-1 faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Section 145(c) of the DGCL provides that to the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of Section 145, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. Section 145(d) of the DGCL states that any indemnification under subsections (a) and (b) of Section 145 (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in subsections (a) and (b). Such determination shall be made (1) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) if there are no such directors or, if such directors so direct, by independent legal counsel in a written opinion, or (3) by the stockholders. Section 145(e) of the DGCL provides that expenses (including attorneys' fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in Section 145. Such expenses (including attorneys' fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. Section 145(f) of the DGCL states that the indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of Section 145 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. Section 145(g) of the DGCL provides that a corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of Section 145. Section 145(j) of the DGCL states that the indemnification and advancement of expenses provided by, or granted pursuant to, Section 145 shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. RESTATED CERTIFICATE OF INCORPORATION The Restated Certificate of Incorporation of the Company provides that a director of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for unlawful payments of dividends or unlawful stock II-2 repurchases or redemptions as provided for in Section 174 of the DGCL. If the DGCL is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Company, in addition to the limitation on personal liability described above, shall be limited to the fullest extent permitted by the amended DGCL. Further, any repeal or modification of such provision of the Certificate of Incorporation by the stockholders of the Company shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the Company existing at the time of such repeal or modification. BYLAWS The Bylaws of the Company provide that the Company will indemnify any director or officer of the Company to the fullest extent permitted by applicable law, from and against judgments, fines, amounts paid in settlement and expenses (including attorneys' fees) whatsoever arising out of any event or occurrence related to the fact that such person is or was a director or officer of the Company and further provide that the Company may, but is not required to, indemnify any employee or agent of the Company or a director, officer, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise who is or was serving in such capacity at the request of the Company; provided, however, that the Company is only required to indemnify persons serving as directors and officers (and to the extent authorized by the Board of Directors, such other persons) for the expenses incurred in a proceeding if such person has met the standards of conduct that make it permissible under the laws of the State of Delaware for the Company to indemnify the claimant for the amount claimed. The Bylaws further provide that, in the event of any threatened, or pending action, suit or proceeding in which any director or officer of the Company is a party or is involved and that may give rise to a right of indemnification under the Bylaws, following written request by such person, the Company will promptly pay to such person amounts to cover expenses reasonably incurred by such person in such proceeding in advance of its final disposition upon such person undertaking to repay the advance if it is ultimately determined that such person is not entitled to be indemnified by the Company as provided in the Bylaws. UNDERWRITING AGREEMENT The Underwriting Agreement provides for the indemnification of the directors and officers of the Company in certain circumstances. INSURANCE The Company intends to maintain liability insurance for the benefit of its directors and officers. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. The following information relates to securities issued or sold by the Company within the last three years: (i) In connection with the formation of the Company, on February 22, 1997 PII issued shares of its common stock to J. Michael Casas (200,000 shares), James L. Dunn, Jr. (100,000 shares), John G. Thayer (66,667 shares), Allen M. Gelwick (66,667 shares), Stephen P. Schmitt (33,333 shares), Dunn Family Trust, James L. Dunn, Jr., Trustee (33,333 shares), JoAn Majors (66,667 shares), John W. Parsons (66,667 shares) and Richard M. Vento (33,333 shares), at a purchase price per share of $0.01. On May 12, 1997, PII issued Class B Preferred to J. Michael Casas (66,667 shares), James L. Dunn, Jr. (33,334 shares) and John W. Parsons (33,334 shares), at a purchase price per share of $0.01. On May 22, 1997, PII issued shares of its common stock to George M. Siegel (300,000 shares), Omer K. Reed, D.D.S. (150,000 shares), Gary S. Glatter (100,000 shares), Kelly W. Reed (150,000 shares), Stephen E. Stapleton (33,333 shares) and Kimberlee K. Rozman (33,333 shares), at a purchase price per share of $0.01. On June 13, 1997, (i) PII issued shares of its Class A Preferred to Marie Adamo II-3 (50,000 shares), Peter Anderson, Aurous, Ltd. (25,000 shares), Scott Bolding (25,000 shares), William Decker (100,000 shares), Peter Anderson, Dufo, Ltd. (25,000 shares), Daniel Goldman, Goldfam, Ltd. (75,000 shares), Peter Anderson, Laguna Enterprises, Ltd. (25,000 shares), James Landers (50,000 shares), Gary Nagler (25,000 shares), Debra Novosad (50,000 shares), Edward Pitts, P/S Plan (125,000 shares), RTT Investments (150,000 shares), Candy Segall (25,000 shares), Annie Smith (50,000 shares) and Ken W. Smith (100,000 shares), at a purchase price per share of $1.00; (ii) PII issued shares of its Class B Preferred to Omer K. Reed, D.D.S. (37,500 shares), Gary S. Glatter (37,500 shares), George M. Siegel (37,500 shares), Stephen E. Stapleton (12,500 shares), Mack E. Greder, D.D.S. (25,000 shares), Roger Allen Kay, D.D.S. (25,000 shares), Debra Novosad (50,000 shares), Bruce A. Kanehl, D.D.S. (25,000 shares), George King, D.D.S. (25,000 shares), Brian K. Kniff, D.D.S. (25,000 shares), Richard W. Mains, D.D.S., RBM Trust (25,000 shares), James W. Medlock, D.D.S. (25,000 shares), Thomas L. Mullooly, D.D.S. (25,000 shares), Richard H. Fettig, D.D.S. (25,000 shares), Marvin V. Cavallino, D.D.S. (50,000 shares), Alan H. Gerbholz, D.D.S. (25,000 shares), Victor H. Burdick, D.D.S. (25,000 shares), Steve Anderson, D.D.S. (25,000 shares) and James P. Allen, D.D.S. (25,000 shares), at a purchase price per share of $1.00; and (iii) PII issued shares of its common stock to Omer K. Reed, D.D.S. (7,500 shares), Gary S. Glatter (7,500 shares), George M. Siegel (7,500 shares), Stephen E. Stapleton (2,500 shares), Mack E. Greder, D.D.S. (5,000 shares), Roger Allen Kay, D.D.S. (5,000 shares), Marie Adamo (10,000 shares), Peter Anderson, Aurous, Ltd. (5,000 shares), Scott Bolding (5,000 shares), William Decker (20,000 shares), Peter Anderson, Dufo, Ltd. (5,000 shares), Daniel Goldman, Goldfam, Ltd. (35,000 shares), Peter Anderson, Laguna Enterprises, Ltd. (5,000 shares), James Landers (10,000 shares), Gary Nagler (5,000 shares), Debra Novosad (20,000 shares), Edward Pitts, P/S Plan (38,333 shares), RTT Investments (30,000 shares), Candy Segall (5,000 shares), Annie Smith (10,000 shares), Ken W. Smith (20,000 shares), Marvin V. Cavallino, D.D.S. (10,000 shares), Bruce A. Kanehl, D.D.S. (5,000 shares), Richard H. Fettig, D.D.S. (5,000 shares), Victor H. Burdick, D.D.S. (5,000 shares), Thomas L. Mullooly, D.D.S. (5,000 shares), James W. Medlock, D.D.S. (5,000 shares), Alan H. Gerbholz, D.D.S. (5,000 shares), Richard W. Mains, D.D.S., RBM Trust (5,000 shares), Brian K. Kniff, D.D.S. (5,000 shares), George King, D.D.S. (5,000 shares), Steve Anderson, D.D.S. (5,000 shares) and James P. Allen, D.D.S. (5,000 shares), at a purchase price of $0.01 per share. On September 1, 1997, PII issued 66,667 shares of its common stock to Sam H. Carr at a purchase price of $0.01 per share. On October 8, 1997, PII issued 6,667 shares of its common stock to Manhattan Group Funding and 13,333 shares of its common stock to Daniel A. Bock, at a purchase price of $0.01 per share. Each of the above-mentioned issuances was exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof as transactions not involving any public offering. (ii) ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits.
EXHIBIT NUMBER DESCRIPTION - ----------- ------------------------------------------------------------------------------------------------- 1.1 -- Form of Underwriting Agreement. 2.1+ -- Form of Asset Contribution Agreement between Pentegra Dental Group, Inc. and a sole proprietorship 2.2+ -- Form of Asset Contribution Agreement between Pentegra Dental Group, Inc. and a partnership 2.3+ -- Form of Asset Contribution Agreement between Pentegra Dental Group, Inc. and an entity
II-4
EXHIBIT NUMBER DESCRIPTION - ----------- ------------------------------------------------------------------------------------------------- 2.4+ -- Form of Agreement and Plan of Reorganization between Pentegra Dental Group, Inc. and an entity 2.5+ -- Exchange Agreement dated as of July 31, 1997 among Pentegra Investments, Inc., Pentegra Dental Group, Inc. and the stockholders named therein 2.6+ -- Asset Contribution Agreement dated as of August 20, 1997 among Pentegra Dental Group, Inc., Pentegra, Ltd., Napili International and Omer K. Reed, D.D.S. 2.7 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and James P. Allen, D.D.S. 2.8 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Walter J. Anderson, D.D.S, Donald H. Plotkin, D.D.S, William H. Swilley, D.D.S., William A. Cerny, D.D.S. and Graham A. Satchell, D.D.S., Inc., dba Anderson Dental Group and Walter J. Anderson, D.D.S., Donald H. Plotkin, D.D.S., William A. Cerny, D.D.S., Brian M. Ellis, D.D.S. and Afshan Kaviani, D.D.S. 2.9 -- Asset Contribution Agreement dated August 15, 1997 by and among Pentegra Dental Group, Inc., Ronnie Andress, D.D.S., Inc., and Ronnie Andress, D.D.S. 2.10 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Victor H. Burdick, D.D.S., P.C., and Victor H. Burdick, D.D.S. 2.11 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Marvin V. Cavallino, D.D.S., A Professional Corporation, and Marvin Cavallino, D.D.S. 2.12 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., James H. Clarke, Jr., D.D.S., Inc. and James H. Clarke, Jr., D.D.S. 2.13 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Henry Cuttler, D.D.S. 2.14 -- Agreement and Plan of Reorganization dated August 11, 1997 by and among Pentegra Dental Group, Inc., Edward T. Dougherty, Jr., D.D.S., P.A., and Edward T. Dougherty, Jr., D.D.S. 2.15 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., Family Dental Centers, P.A., Steve Anderson, D.D.S. and Lindi B. Anderson, D.D.S. 2.16 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Richard H. Fettig, D.D.S. 2.17 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., Alan H. Gerbholz, D.D.S., P.C. and The AMG Trust. 2.18 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Michael J. Gershtenson, D.D.S., P.C. and Michael J. Gershtenson, D.D.S. 2.19 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Mack E. Greder, D.D.S, P.C. and Mack Greder, D.D.S. 2.20 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Salvatore J. Guarnieri, D.D.S. 2.21 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., Kent M. Hamilton, D.D.S, P.C. and Kent M. Hamilton, D.D.S. 2.22 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and David R. Henderson, D.D.S
II-5
EXHIBIT NUMBER DESCRIPTION - ----------- ------------------------------------------------------------------------------------------------- 2.23 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Stephen Hwang, D.D.S 2.24 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., Jackson Dental Partnership, Penn Jackson, Sr. and Penn Jackson, Jr. 2.25 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Bruce A. Kanehl, D.D.S. 2.26 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., Roger Allen Kay, D.D.S, P.A. and Roger A. Kay, D.D.S. 2.27 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Patrick T. Kelly, D.D.S, P.C. and Patrick T. Kelly, D.D.S. 2.28 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Brian K. Kniff, D.D.S, P.C., Brian K. Kniff, D.D.S and Gordon Ledingham, D.D.S. 2.29 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Lakeview Dental, P.C. and Kevin Gasser, D.D.S. 2.30 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Donald W. Lanning, D.D.S. 2.31 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and David A. Little, D.D.S. 2.32 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., Susan E. Lunson, D.D.S., P.C. and Susan E. Lunson, D.D.S. 2.33 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., Richard W. Mains, Jr., D.M.D, P.C. and Richard W. Mains, Jr., D.M.D. 2.34 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and James M. McDonough, D.D.S. 2.35 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., James W. Medlock, D.D.S., P.A. and James Medlock, D.D.S. 2.36 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., James Randy Mellard, D.D.S., M.S., P.C. and James Randy Mellard, D.D.S., M.S. 2.37 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Mary B. Mellard, D.D.S., P.C. and Mary B. Mellard, D.D.S. 2.38 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., T.L. Mullooly, D.D.S., Inc. and T.L. Mullooly, D.D.S. 2.39 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., Byron L. Novosad, D.D.S., Inc. and Byron L. Novosad, D.D.S. 2.40 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., Randy O'Brien, D.D.S., Inc. and Randy O'Brien, D.D.S. 2.41 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Terrence C. O'Keefe, D.D.S. 2.42 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Harold A. Pebbles, D.D.S., P.C. and Harold Pebbles, D.D.S. 2.43 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Jimmy F. Pinner, D.D.S. 2.44 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Omer K. Reed, D.D.S., Ltd. and Omer K. Reed, D.D.S.
II-6
EXHIBIT NUMBER DESCRIPTION - ----------- ------------------------------------------------------------------------------------------------- 2.45 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Richard Reinitz, D.D.S., P.C. and Richard Reinitz, D.D.S. 2.46 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Greg Richards, D.D.S. 2.47 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Richard N. Smith, DMD, P.C. and The Paradise Trust 2.48 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and John N. Stellpflug, D.D.S. 2.49 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Jack Stephens, D.D.S. 2.50 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Y. Paul Suzuki, D.D.S., P.S. and Paul Suzuki, D.D.S. 2.51 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Donald F. Tamborello, D.D.S. 2.52 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Helena Thomas, D.D.S. 2.53 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Louis J. Thornley, D.D.S., P.S. and Louis J. Thornley, D.D.S. 2.54 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and S. Victor Uhrenholdt, D.D.S. 2.55 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Scott Van Zandt, D.D.S. 2.56 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Ronald M. Yaros, D.D.S., P.C. and Ron Yaros, D.D.S. The schedules and exhibits to the foregoing acquisition agreements have not been filed as exhibits to this Registration Statement. Pursuant to Item 601(b)(2) of Regulation S-K, Pentegra Dental Group, Inc. agrees to furnish a copy of such schedules and exhibits to the Commission upon request. 3.1+ -- Restated Certificate of Incorporation of Pentegra Dental Group, Inc. 3.2+ -- Bylaws of Pentegra Dental Group, Inc. 4.1 -- Form of certificate evidencing ownership of Common Stock of Pentegra Dental Group, Inc. 4.2+ -- Form of Registration Rights Agreement for Owners of Founding Affiliated Practices 4.3+ -- Registration Rights Agreement dated September 30, 1997 between Pentegra Dental Group, Inc. and the stockholders named therein 5.1 -- Opinion of Jackson Walker L.L.P. 10.1+ -- Pentegra Dental Group, Inc. 1997 Stock Compensation Plan 10.2+ -- Employment Agreement dated July 31, 1997 between Pentegra Dental Group, Inc. and Omer K. Reed, D.D.S. 10.3+ -- Employment Agreement dated July 1, 1997 between Pentegra Dental Group, Inc. and Gary S. Glatter 10.4+ -- Employment Agreement dated July 12, 1997 between Pentegra Dental Group, Inc. and John Thayer 10.5+ -- Employment Agreement dated September 1, 1997 between Pentegra Dental Group, Inc. and Sam H. Carr
II-7
EXHIBIT NUMBER DESCRIPTION - ----------- ------------------------------------------------------------------------------------------------- 10.6+ -- Employment Agreement dated July 12, 1997 between Pentegra Dental Group, Inc. and James Dunn, Jr. 10.7+ -- Employment Agreement dated July 12, 1997 between Pentegra Dental Group, Inc. and Kimberlee K. Rozman 10.8+ -- Form of Service Agreement 23.1 -- Consent of Coopers & Lybrand L.L.P. 23.2 -- Consent of Jackson Walker L.L.P. (contained in Exhibit 5.1) 23.3+ -- Consents of Director Nominees. 24.1+ -- Power of Attorney (contained on the signature page of this Registration Statement). 27.1 -- Financial Data Schedule.
- --------- + Previously filed. (b) Financial Statement Schedules. All schedules are omitted because they are not applicable or because the required information is contained in the Financial Statements or Notes thereto. ITEM 17. UNDERTAKINGS. The undersigned registrant hereby undertakes as follows: (1) To provide to the Underwriters at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser. (2) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 14, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payments by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (3) That, for the purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (4) That, for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, Pentegra Dental Group, Inc. has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on December 10, 1997. PENTEGRA DENTAL GROUP, INC. By: /s/ GARY S. GLATTER ----------------------------------------- Gary S. Glatter PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on December 10, 1997. SIGNATURES TITLE - ------------------------------ ---------------------------------------------- /s/ GARY S. GLATTER - ------------------------------ President, Chief Executive Officer and Gary S. Glatter Director (Principal Executive Officer) /s/ SAM H. CARR Senior Vice President and Chief Financial - ------------------------------ Officer (Principal Financial and Accounting Sam H. Carr Officer) /s/ OMER K. REED, D.D.S.* - ------------------------------ Chairman of the Board Omer K. Reed, D.D.S. /s/ J. MICHAEL CASAS* - ------------------------------ Director J. Michael Casas /s/ ALLEN M. GELWICK* - ------------------------------ Director Allen M. Gelwick /s/ GEORGE M. SIEGEL* - ------------------------------ Director George M. Siegel /s/ JAMES L. DUNN, JR.* - ------------------------------ Director James L. Dunn, Jr. *By /s/ KIMBERLEE K. ROZMAN - ------------------------------ Kimberlee K. Rozman, as ATTORNEY-IN-FACT II-9 INDEX TO EXHIBITS
EXHIBIT SEQUENTIALLY NUMBER DESCRIPTION NUMBERED PAGE - ---------- ------------------------------------------------------------------------------------------- --------------- 1.1 -- Form of Underwriting Agreement. 2.1+ -- Form of Asset Contribution Agreement between Pentegra Dental Group, Inc. and a sole proprietorship 2.2+ -- Form of Asset Contribution Agreement between Pentegra Dental Group, Inc. and a partnership 2.3+ -- Form of Asset Contribution Agreement between Pentegra Dental Group, Inc. and an entity 2.4+ -- Form of Agreement and Plan of Reorganization between Pentegra Dental Group, Inc. and an entity 2.5+ -- Exchange Agreement dated July 31, 1997 among Pentegra Investments, Inc., Pentegra Dental Group, Inc. and the stockholders named therein 2.6+ -- Asset Contribution Agreement dated as of August 20, 1997 among Pentegra Dental Group, Inc., Pentegra, Ltd., Napili International and Omer K. Reed, D.D.S. 2.7 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and James P. Allen, D.D.S. 2.8 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Walter J. Anderson, D.D.S, Donald H. Plotkin, D.D.S, William H. Swilley, D.D.S., William A. Cerny, D.D.S. and Graham A. Satchell, D.D.S., Inc., dba Anderson Dental Group and Walter J. Anderson, D.D.S., Donald H. Plotkin, D.D.S., William A. Cerny, D.D.S., Brian M. Ellis, D.D.S. and Afshan Kaviani, D.D.S. 2.9 -- Asset Contribution Agreement dated August 15, 1997 by and among Pentegra Dental Group, Inc., Ronnie Andress, D.D.S., Inc., and Ronnie Andress, D.D.S. 2.10 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Victor H. Burdick, D.D.S., P.C., and Victor H. Burdick, D.D.S. 2.11 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Marvin V. Cavallino, D.D.S., A Professional Corporation, and Marvin Cavallino, D.D.S. 2.12 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., James H. Clarke, Jr., D.D.S., Inc. and James H. Clarke, Jr., D.D.S. 2.13 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Henry Cuttler, D.D.S. 2.14 -- Agreement and Plan of Reorganization dated August 11, 1997 by and among Pentegra Dental Group, Inc., Edward T. Dougherty, Jr., D.D.S., P.A., and Edward T. Dougherty, Jr., D.D.S. 2.15 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., Family Dental Centers, P.A., Steve Anderson, D.D.S. and Lindi B. Anderson, D.D.S. 2.16 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Richard H. Fettig, D.D.S. 2.17 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., Alan H. Gerbholz, D.D.S., P.C. and The AMG Trust. 2.18 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Michael J. Gershtenson, D.D.S., P.C. and Michael J. Gershtenson, D.D.S. 2.19 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Mack E. Greder, D.D.S, P.C. and Mack Greder, D.D.S.
2.20 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Salvatore J. Guarnieri, D.D.S. 2.21 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., Kent M. Hamilton, D.D.S, P.C. and Kent M. Hamilton, D.D.S. 2.22 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and David R. Henderson, D.D.S 2.23 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Stephen Hwang, D.D.S 2.24 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., Jackson Dental Partnership, Penn Jackson, Sr. and Penn Jackson, Jr. 2.25 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Bruce A. Kanehl, D.D.S. 2.26 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., Roger Allen Kay, D.D.S, P.A. and Roger A. Kay, D.D.S. 2.27 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Patrick T. Kelly, D.D.S, P.C. and Patrick T. Kelly, D.D.S. 2.28 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Brian K. Kniff, D.D.S, P.C., Brian K. Kniff, D.D.S and Gordon Ledingham, D.D.S. 2.29 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Lakeview Dental, P.C. and Kevin Gasser, D.D.S. 2.30 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Donald W. Lanning, D.D.S. 2.31 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and David A. Little, D.D.S. 2.32 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., Susan E. Lunson, D.D.S., P.C. and Susan E. Lunson, D.D.S. 2.33 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., Richard W. Mains, Jr., D.M.D, P.C. and Richard W. Mains, Jr., D.M.D. 2.34 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and James M. McDonough, D.D.S. 2.35 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., James W. Medlock, D.D.S., P.A. and James Medlock, D.D.S. 2.36 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., James Randy Mellard, D.D.S., M.S., P.C. and James Randy Mellard, D.D.S., M.S. 2.37 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Mary B. Mellard, D.D.S., P.C. and Mary B. Mellard, D.D.S. 2.38 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., T.L. Mullooly, D.D.S., Inc. and T.L. Mullooly, D.D.S. 2.39 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., Byron L. Novosad, D.D.S., Inc. and Byron L. Novosad, D.D.S. 2.40 -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., Randy O'Brien, D.D.S., Inc. and Randy O'Brien, D.D.S. 2.41 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Terrence C. O'Keefe, D.D.S.
2.42 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Harold A. Pebbles, D.D.S., P.C. and Harold Pebbles, D.D.S. 2.43 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Jimmy F. Pinner, D.D.S. 2.44 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Omer K. Reed, D.D.S., Ltd. and Omer K. Reed, D.D.S. 2.45 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Richard Reinitz, D.D.S., P.C. and Richard Reinitz, D.D.S. 2.46 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Greg Richards, D.D.S. 2.47 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Richard N. Smith, DMD, P.C. and The Paradise Trust 2.48 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and John N. Stellpflug, D.D.S. 2.49 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Jack Stephens, D.D.S. 2.50 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Y. Paul Suzuki, D.D.S., P.S. and Paul Suzuki, D.D.S. 2.51 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Donald F. Tamborello, D.D.S. 2.52 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Helena Thomas, D.D.S. 2.53 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Louis J. Thornley, D.D.S., P.S. and Louis J. Thornley, D.D.S. 2.54 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and S. Victor Uhrenholdt, D.D.S. 2.55 -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Scott Van Zandt, D.D.S. 2.56 -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group, Inc., Ronald M. Yaros, D.D.S., P.C. and Ron Yaros, D.D.S. The schedules and exhibits to the foregoing acquisition agreements have not been filed as exhibits to this Registration Statement. Pursuant to Item 601(b)(2) of Regulation S-K, Pentegra Dental Group, Inc. agrees to furnish a copy of such schedules and exhibits to the Commission upon request. 3.1+ -- Restated Certificate of Incorporation of Pentegra Dental Group, Inc. 3.2+ -- Bylaws of Pentegra Dental Group, Inc. 4.1 -- Form of certificate evidencing ownership of Common Stock of Pentegra Dental Group, Inc. 4.2+ -- Form of Registration Rights Agreement for Owners of Founding Affiliated Practices 4.3+ -- Registration Rights Agreement dated September 30, 1997 between Pentegra Dental Group, Inc. and the stockholders named therein 5.1 -- Opinion of Jackson Walker L.L.P. 10.1+ -- Pentegra Dental Group, Inc. 1997 Stock Compensation Plan 10.2+ -- Employment Agreement dated July 31, 1997 between Pentegra Dental Group, Inc. and Omer K. Reed, D.D.S.
10.3+ -- Employment Agreement dated July 1, 1997 between Pentegra Dental Group, Inc. and Gary S. Glatter 10.4+ -- Employment Agreement dated July 12, 1997 between Pentegra Dental Group, Inc. and John Thayer 10.5+ -- Employment Agreement dated September 1, 1997 between Pentegra Dental Group, Inc. and Sam H. Carr 10.6+ -- Employment Agreement dated July 12, 1997 between Pentegra Dental Group, Inc. and James Dunn, Jr. 10.7+ -- Employment Agreement dated July 12, 1997 between Pentegra Dental Group, Inc. and Kimberlee K. Rozman 10.8+ -- Form of Service Agreement 23.1 -- Consent of Coopers & Lybrand, L.L.P. 23.2 -- Consent of Jackson Walker L.L.P. (contained in Exhibit 5.1) 23.3+ -- Consents of Director Nominees. 24.1+ -- Power of Attorney (contained on the signature page of this Registration Statement). 27.1 -- Financial Data Schedule.
- --------- + Previously filed. EX-1.1 2 EXHIBIT 1.1 DRAFT: NOVEMBER 13, 1997 2,500,000 SHARES PENTEGRA DENTAL GROUP, INC. COMMON STOCK FORM OF UNDERWRITING AGREEMENT ------------------------------ ________ ___, 1997 LEHMAN BROTHERS INC. RAUSCHER PIERCE REFSNES, INC. As Representatives of the several Underwriters named in Schedule I, c/o Lehman Brothers Inc. Three World Financial Center New York, New York 10285 Dear Sirs: Pentegra Dental Group, Inc., a Delaware corporation (the "Company"), proposes to sell 2,500,000 shares (the "Firm Stock") of the Company's common stock, par value $.001 per share ("Common Stock"). In addition, the Company proposes to grant to the Underwriters named in Schedule I hereto (the "Underwriters") an option to purchase up to an additional 375,000 shares of the Common Stock on the terms and for the purposes set forth in Section 2 (the "Option Stock"). The Firm Stock and the Option Stock, if purchased, are hereinafter collectively called the "Stock." This is to confirm the agreement concerning the purchase of the Stock from the Company by the Underwriters. 1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The Company represents, warrants and agrees that: (a) A registration statement on Form S-1 with respect to the Stock has (i) been prepared by the Company in conformity with the requirements of the United States Securities Act of 1933, as amended (the "Securities Act"), and the rules and regulations (the "Rule and Regulations") of the United States Securities and Exchange Commission (the "Commission") thereunder, (ii) been filed with the Commission under the Securities Act and (iii) become effective under the Securities Act. Copies of such registration statement have been delivered by the Company to you as the representatives (the "Representatives") of the Underwriters. As used in this Agreement, "Effective Time" means the date and the time as of which such registration statement, or the most recent post-effective amendment thereto, if any, was declared effective by the Commission; "Effective Date" means the date of the Effective Time; "Preliminary Prospectus" means each prospectus included in such registration statement, or 1 amendments thereof, before it became effective under the Securities Act and any prospectus filed with the Commission by the Company with the prior written consent of the Representatives pursuant to Rule 424(a) of the Rules and Regulations; "Registration Statement" means such registration statement, as amended at the Effective Time, including all information contained in the final prospectus filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations in accordance with Section 5(a) hereof and deemed to be a part of the registration statement as of the Effective Time pursuant to paragraph (b) of Rule 430A of the Rules and Regulations; and "Prospectus" means such final prospectus, as first filed with the Commission pursuant to paragraph (1) or (4) of Rule 424(b) of the Rules and Regulations. The Commission has not issued any order preventing or suspending the use of any Preliminary Prospectus. (b) The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement or the Prospectus will, when they become effective or are filed with the Commission, as the case may be, conform in all material respects to the requirements of the Securities Act and the Rules and Regulations and do not and will not, as of the applicable effective date (as to the Registration Statement and any amendment thereto) and as of the applicable filing date (as to the Prospectus and any amendment or supplement thereto) contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; PROVIDED that no representation or warranty is made as to information contained in or omitted from the Registration Statement or the Prospectus in reliance upon and in conformity with written information furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for inclusion therein (which written information is specifically identified in Section 8(e)). (c) After giving effect to the share exchange (the "Share Exchange") among the Company and the holders of the outstanding shares of common stock of Pentegra Investments, Inc., a Delaware corporation ("PII"), to be completed on the First Delivery Date (as hereinafter defined) pursuant to the terms of the Exchange Agreement dated as of July 31, 1997 among the Company, PII and the holders of common stock of PII (the "Share Exchange Agreement") (a copy of which has been filed as an exhibit to the Registration Statement), PII will be the only subsidiary (as defined in Section 15) of the Company as of the First Delivery Date, and the Company has never had any other subsidiary. (d) The Company, PII and each of the entities that, on or prior to the First Delivery Date, will have entered into an Acquisition Agreement (as hereinafter defined) and/or a management service agreement or similar contract (each, a "Service Agreement") with the Company (collectively, the "PA Affiliates"), other than those PA Affiliates that are sole proprietorships, have been duly organized and are validly existing in good standing (to the extent applicable) under the laws of their respective jurisdictions of organization, are duly registered and qualified to transact business and are in good standing as foreign corporations, professional corporations, professional associations, limited liability companies or limited partnerships, as the case may 2 be, in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification, and have all power and authority necessary to own, lease, operate or hold their respective properties and to conduct the businesses in which they are engaged. The PA Affiliates are listed on Schedule II hereto, and the information contained in such Schedule is true and correct. (e) The Company has an authorized capitalization as set forth in the Prospectus, and all of the shares of capital stock of the Company that will be issued and outstanding as of the First Delivery Date (before giving effect to the issuance and sale of the shares of Stock hereunder) have been duly and validly authorized and, when issued and delivered pursuant to the Share Exchange Agreement and the Acquisition Agreements (as hereinafter defined) on the First Delivery Date, will be duly and validly issued, fully paid and nonassessable, will not have been issued in violation of any preemptive or similar rights and conform to the description thereof contained in the Prospectus; and all of the issued shares of capital stock of PII have been duly and validly authorized and issued and are fully paid and nonassessable, have not been issued in violation of any preemptive or similar rights and, as of the First Delivery Date, will be owned directly by the Company, free and clear of all liens, encumbrances, equities or claims. (f) The shares of the Stock to be issued and sold by the Company to the Underwriters hereunder have been duly and validly authorized and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued, fully paid and nonassessable and will not have been issued in violation of or be subject to any preemptive or similar rights; and the Stock will conform to the description thereof contained in the Prospectus. (g) The Company has the power and authority to enter into this Agreement and to issue, sell and deliver the Stock to the Underwriters as provided herein. This Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and binding agreement of the Company enforceable against the Company in accordance with its terms, subject to the effect of (i) any applicable bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). (h) The Company has the power and authority to enter into each of the acquisition transactions to be consummated on the First Delivery Date, as described in the Registration Statement and the Prospectus (collectively, the "Acquisitions"), each of the agreements pursuant to which an Acquisition is being consummated (collectively, the "Acquisition Agreements" and, together with the Service Agreements, the "Transaction Agreements") and each of the Service Agreements to which it is (or, as of the First Delivery Date, will be) a party. Each PA Affiliate has the power and authority to enter into each Transaction Agreement to which it is (or, as of the First Delivery Date, will be) a party. The execution and delivery of, and the performance by the Company and the PA Affiliates of their respective obligations under, the Transaction Agreements to which they are parties, respectively, have been duly and validly authorized by 3 the Company and the PA Affiliates and each Transaction Agreement has been (or, in the case of any such Transaction Agreement to be entered into between the date of this Agreement and the time of the deliveries to be made under this Agreement on the First Delivery Date, will, as of the First Delivery Date, be) duly executed and delivered by the Company and each PA Affiliate that is a party to such agreement, and constitutes (or, in the case of any such Transaction Agreement to be entered into between the date of this Agreement and the time of the deliveries to be made under this Agreement on the First Delivery Date, will, as of the First Delivery Date, constitute) the legal, valid and binding agreement of the Company and each such PA Affiliate, enforceable in accordance with its terms, except as that enforceability may be subject to the effect of (i) any applicable bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). (i) The execution, delivery and performance of this Agreement and each of the Transaction Agreements by the Company and the consummation of the transactions contemplated hereby and thereby will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company, PII or any of the PA Affiliates is a party or by which the Company, PII or any of the PA Affiliates is bound or to which any of the property or assets of the Company, PII or any of the PA Affiliates is subject, nor will such actions result in any violation of the provisions of the charter, by-laws or other organizational documents of the Company, PII or any of the PA Affiliates or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company, PII or any of the PA Affiliates or any of their respective properties or assets; except for the registration of the Stock under the Securities Act and such consents, approvals, authorizations, registrations or qualifications as may be required under the United States Securities Exchange Act of 1934, as amended (the "Exchange Act"), and applicable state securities laws in connection with the purchase and distribution of the Stock by the Underwriters, no consent, approval, authorization or order of, or filing or registration with, any such court or governmental agency or body is required for the execution, delivery and performance of this Agreement by the Company or the consummation of the transactions contemplated hereby; and no consent, approval, authorization or order of, or filing or registration with, any court or governmental agency or body is required for the execution, delivery and performance of any of the Transaction Agreements or the consummation of the transactions contemplated thereby. (j) There are no contracts, agreements or understandings between the Company and any person granting such person the right to (i) require the Company to file a registration statement under the Securities Act with respect to any securities of the Company owned or to be owned by such person, (ii) require the Company to include such securities in the securities registered pursuant to the Registration Statement or (iii) except as described in the Prospectus, require that 4 any securities be registered pursuant to any other registration statement filed by the Company under the Securities Act. (k) Except as described in the Registration Statement, the Company has not sold or issued any shares of Common Stock during the six-month period preceding the date of the Prospectus, including any sales pursuant to Rule 144A under, or Regulations D or S of, the Securities Act. (l) None of the Company, PII or any of the PA Affiliates has sustained, since the date of the latest audited financial statements included in the Prospectus, any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus; and, since such date, (i) there has not been any material change in the capital stock or long-term or short-term debt of the Company, PII or any of the PA Affiliates or any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, consolidated financial position, stockholders' equity, results of operations or prospects of the Company, otherwise than as set forth or contemplated in the Prospectus and (ii) except as may otherwise be disclosed in the Prospectus, the Company has not (A) issued or granted any securities, (B) incurred any liability or obligation, direct, indirect or contingent, other than liabilities and obligations that were incurred in the ordinary course of business, (C) entered into any transaction not in the ordinary course of business or (D) declared or paid any dividend on its capital stock. (m) The financial statements (including the related notes and any supporting schedules) filed as part of the Registration Statement or included in the Prospectus present fairly the financial condition and results of operations of the entities purported to be shown thereby, at the dates and for the periods indicated, and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved; the pro forma balance sheet of the Company, together with the related notes, as set forth in the Registration Statement and the Prospectus, present fairly the information shown therein, have been prepared in accordance with the applicable provisions of Article 11 of Regulation S-X promulgated by the Commission with respect to pro forma financial statements and have been properly compiled on the pro forma basis described therein and, in the opinion of the Company, the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions or circumstances referred to therein; and the other financial and statistical information and data set forth in the Registration Statement and the Prospectus (and any amendment or supplement thereto) is, in all material respects, accurately presented and has been prepared on a basis consistent with such financial statements and the books and records of the Company. (n) Coopers & Lybrand LLP, who have certified certain financial statements of the Company, whose report appears in the Prospectus and who have delivered the initial letter 5 referred to in Section 7(i) hereof, are independent public accountants as required by the Securities Act and the Rules and Regulations. (o) None of the Company, PII or the PA Affiliates (i) is in violation of its charter, by-laws or other organizational documents, if any, (ii) is in default in any material respect, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its properties or assets is subject or (iii) is in violation in any material respect of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject or has failed to obtain any material license, permit, certificate, franchise or other governmental authorization or permit necessary to the ownership of its property or to the conduct of its business. (p) Neither the Company, PII nor any of the PA Affiliates has violated any foreign, federal, state or local law or regulation relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (collectively, "Environmental Laws"), or any foreign, federal or state law relating to the practice of dentistry or governing the provision of dental services or the collection and/or application of fees therefrom (collectively, "Applicable Healthcare Laws"), or any foreign, federal or state law relating to discrimination in the hiring, promotion or pay of employees or any applicable foreign, federal or state wages and hours laws, or any provisions of the United States Employee Retirement Income Security Act of 1976, as amended (together with the rules and regulations thereunder, "ERISA"), or the rules and regulations promulgated thereunder, which, singly or in the aggregate, might have a material adverse effect on the consolidated financial position, stockholders' equity, results of operations, business or prospects of the Company and PII, taken as a whole ("Material Adverse Effect"). (q) Each of the Company, PII and the PA Affiliates has such permits, licenses, franchises and authorizations of governmental or regulatory authorities ("permits"), including, without limitation, under any applicable Environmental Laws and Applicable Healthcare Laws and related governmental regulations, as are necessary to own its respective properties and to conduct its business in the manner described in the Prospectus, subject in each case to such qualifications as may be set forth in the Prospectus and except where the failure to have such permits would not, singly or in the aggregate, have a Material Adverse Effect; each of the Company, PII and the PA Affiliates has fulfilled and performed all of its obligations with respect to such permits and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the holder of any such permits, subject in each case to such qualifications as may be set forth in the Prospectus and except where the failure so to fulfill or perform or the occurrence of such an event would not, singly or in the aggregate, have a Material Adverse Effect; and, except as described in the Prospectus, none of such permits contains any restriction that is materially burdensome to the Company, PII or the PA Affiliates. Each of the (i) dentists 6 and (ii) other professionals involved in providing dental care to patients (each, a "Dental Professional") who is employed by or affiliated with a PA Affiliate has such permits under Applicable Healthcare Laws and related governmental regulations (including, as applicable, state and local licenses to practice dentistry and federal Drug Enforcement Agency Controlled Substances Registration certificates) as are necessary to provide dental care in such jurisdictions as are contemplated by the Service Agreement to be entered into between that PA Affiliate and the Company on the First Delivery Date; each of such Dental Professionals has fulfilled and performed all of his or her material obligations with respect to such permits and no event has occurred which allows, or after notice or lapse of time (or both) would allow, revocation or termination thereof or would result in any other material impairment of the rights of the holder of such permit; and, except as described in the Prospectus, no such permit contains any restrictions that are materially burdensome to the holder thereof or the PA Affiliate with which that holder is affiliated or employed. The Company's and each PA Affiliate's business practices do not violate any foreign, federal or state laws regarding dentist ownership of (or financial relationship with), and referral to, entities providing dental-related goods or services, or laws respecting financial interests held by dentists in entities to which they may refer patients for the provision of dental-related goods or services. None of the PA Affiliates (or any of their respective predecessors) has billed or accepted payment from any Medicare, Medicaid or CHAMPUS program during the two years preceding the date of this Agreement in an aggregate amount that was material to their respective total billings or payments for either of those years. (r) The Company, PII and each of the PA Affiliates have good and marketable title in fee simple to all real property that has been or, pursuant to the Acquisition Agreements, is to be acquired by the Company on or before the First Closing Date and good and marketable title to all personal property owned by them that has been or, pursuant to the Acquisition Agreements, is to be acquired by the Company on or before the First Closing Date, in each case free and clear of all liens, encumbrances and defects, except such as are described in the Prospectus or such as do not materially adversely affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company, PII and the PA Affiliates; and all real property and buildings held under lease by the Company, PII and the PA Affiliates are held by them under valid, subsisting and enforceable leases, with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company, PII and the PA Affiliates. Each PA Affiliate has obtained all consents of third parties necessary under each lease (whether relating to real property or personal property) to which it is a party for the consummation of the transactions contemplated by the Transaction Agreements to which it is (or, as of the First Delivery Date, will be) a party. (s) The Company, PII and each of the PA Affiliates carry, or otherwise are covered by, insurance in such amounts and covering such risks (including, without limitation, malpractice risks) as is adequate for the conduct of their respective businesses and the value of their respective properties and as is customary for companies engaged in similar businesses; and 7 none of the Company, PII or any of the PA Affiliates has received any notice of cancellation or nonrenewal with respect to such insurance. (t) Each of the Company, PII and the PA Affiliates owns or possesses adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights and licenses used in the conduct of its business and the Company has no reason to believe that the conduct of their respective businesses will conflict with, and has not received any notice of any claim of conflict with, any such rights of others. (u) There are no legal or governmental proceedings (domestic or foreign) pending to which the Company, PII or any of the PA Affiliates is a party or of which any property or assets of the Company, PII or any of the PA Affiliates is the subject which, singly or in the aggregate, if determined adversely to the Company, PII or any of the PA Affiliates, might have a Material Adverse Effect; and, to the best of the Company's knowledge, no such proceedings are threatened or contemplated by any governmental authorities or threatened by others. (v) There are no contracts or other documents that are required to be described in the Prospectus or filed as exhibits to the Registration Statement by the Securities Act or by the Rules and Regulations which have not been described in the Prospectus or filed as exhibits to the Registration Statement as required. (w) No relationship, direct or indirect, exists between or among the Company, on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company, on the other hand, that is required to be described in the Prospectus and that is not so described. (x) No labor disturbance by the employees of the Company, PII or any of the PA Affiliates exists or, to the knowledge of the Company, is imminent which might be expected to, singly or in the aggregate, have a Material Adverse Effect; none of the Company, PII or any of the PA Affiliates has ever been party to a collective bargaining agreement; and there are no significant unfair labor practice complaints pending against the Company, PII or any of the PA Affiliates or, to the best of the Company's knowledge, threatened against any of them. The Company is in compliance in all material respects with all presently applicable provisions of ERISA; no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Company would have any liability; the Company has not incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the United States Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the "Code"); and each "pension plan" for which the Company would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification. 8 (y) The Company and each of the PA Affiliates (i) have filed all federal, state, local and foreign income and franchise tax returns required to be filed through the date hereof and (ii) have paid all taxes due thereon. No tax deficiency has been determined adversely to the Company, PII or any of the PA Affiliates which has resulted in (nor does the Company have any knowledge of any tax deficiency which, if determined adversely to the Company, PII or any of the PA Affiliates, might result in), singly or in the aggregate, a Material Adverse Effect. (z) None of the Company, PII or the PA Affiliates, nor any director, officer, agent, employee or other person associated with or acting on behalf of the Company, PII or the PA Affiliates, has used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment. (aa) The Company (i) makes and keeps accurate books and records and (ii) maintains internal accounting controls which provide reasonable assurance that (A) transactions are executed in accordance with management's authorization, (B) transactions are recorded as necessary to permit preparation of its financial statements and to maintain accountability for its assets, (C) access to its assets is permitted only in accordance with management's authorization and (D) the reported accountability for its assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any difference. (bb) There has been no storage, disposal, generation, manufacture, refinement, transportation, handling or treatment of toxic wastes, medical wastes, hazardous wastes or hazardous substances by the Company or PII (or, to the knowledge of the Company, any of their predecessors in interest) at, upon or from any of the property now or previously owned, leased or operated by the Company or PII in violation of any applicable law, ordinance, rule, regulation, order, judgment, decree or permit or which could require remedial action under any applicable law, ordinance, rule, regulation, order, judgment, decree or permit, except for any violation or remedial action which would not have, or could not reasonably be expected to have, singularly or in the aggregate with all such violations and remedial actions, a Material Adverse Effect; there has been no material spill, discharge, leak, emission, injection, escape, dumping or release of any kind onto such property or into the environment surrounding such property of any toxic wastes, medical wastes, solid wastes, hazardous wastes or hazardous substances due to or caused by the Company or PII or with respect to which the Company or PII have knowledge, except for any such spill, discharge, leak, emission, injection, escape, dumping or release which would not have or would not be reasonably likely to have, singularly or in the aggregate with all such spills, discharges, leaks, emissions, injections, escapes, dumpings and releases, a Material Adverse Effect; and the terms "hazardous wastes," "toxic wastes," "hazardous substances" and "medical wastes" shall have the meanings specified in any applicable local, state, federal and foreign laws or regulations with respect to environmental protection. 9 (cc) In connection with the offering of the Stock contemplated hereby, the Company has conducted a review of the effect of Environmental Laws on the business, operations and properties of the Company, PII and the PA Affiliates in the course of which it has identified and evaluated associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties). On the basis of such review, the Company has concluded that such associated costs and liabilities would not, singly or in the aggregate, result in a Material Adverse Effect or any development involving a prospective Material Adverse Effect. (dd) The Company has not taken and will not take, directly or indirectly, any action designed to cause or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of shares of the Common Stock to facilitate the sale or resale of the Stock. (ee) Neither the Company nor PII is, and upon consummation of the transactions contemplated hereby neither will be, an "investment company" within the meaning of such term under the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder. 2. PURCHASE OF THE STOCK BY THE UNDERWRITERS. On the basis of the representations and warranties contained in, and subject to the terms and conditions of, this Agreement, the Company agrees to sell 2,500,000 shares of the Firm Stock to the several Underwriters, and each of the Underwriters, severally and not jointly, agrees to purchase the number of shares of the Firm Stock set opposite that Underwriter's name in Schedule I hereto. The respective purchase obligations of the Underwriters with respect to the Firm Stock shall be rounded among the Underwriters to avoid fractional shares, as the Representatives may determine. In addition, the Company grants to the Underwriters an option to purchase up to 375,000 shares of Option Stock. Such option is granted solely for the purpose of covering over-allotments in the sale of Firm Stock and is exercisable as provided in Section 4 hereof. Shares of Option Stock shall be purchased severally for the account of the Underwriters in proportion to the number of shares of Firm Stock set opposite the name of such Underwriters in Schedule I hereto. The respective purchase obligations of each Underwriter with respect to the Option Stock shall be adjusted by the Representatives so that no Underwriter shall be obligated to purchase Option Stock other than in 100-share amounts. The price of both the Firm Stock and any Option Stock shall be $_____ per share. The Company shall not be obligated to deliver any of the Stock to be delivered on the First Delivery Date or the Second Delivery Date (as hereinafter defined), as the case may be, except upon payment for all the Stock to be purchased on such Delivery Date (as hereinafter defined) as provided herein. 10 3. OFFERING OF STOCK BY THE UNDERWRITERS. Upon authorization by the Representatives of the release of the Firm Stock, the several Underwriters propose to offer the Firm Stock for sale upon the terms and conditions set forth in the Prospectus. It is understood that 175,000 shares of the Firm Stock will initially be reserved by the several Underwriters for offer and sale upon the terms and conditions set forth in the Prospectus and in accordance with the rules and regulations of the National Association of Securities Dealers, Inc. to employees and persons having business relationships with the Company who have heretofore delivered to the Representatives offers or indications of interest to purchase shares of Firm Stock in form satisfactory to the Representatives, and that any allocation of such Firm Stock among such persons will be made in accordance with timely directions received by the Representatives from the Company; PROVIDED that under no circumstances will the Representatives or any Underwriter be liable to the Company or to any such person for any action taken or omitted in good faith in connection with such offering to employees and persons having business relationships with the Company. It is further understood that any shares of such Firm Stock which are not purchased by such persons will be offered by the Underwriters to the public upon the terms and conditions set forth in the Prospectus. 4. DELIVERY OF AND PAYMENT FOR THE STOCK. Delivery of and payment for the Firm Stock shall be made at the office of Lehman Brothers Inc., New York, New York, at 10:00 A.M., New York City time, on the third or fourth business day (as permitted under Rule 15c6-1 under the Exchange Act) following the date of this Agreement or at such other date or place as shall be determined by agreement between the Representatives and the Company. This date and time are sometimes referred to as the "First Delivery Date." On the First Delivery Date, the Company shall deliver or cause to be delivered certificates representing the Firm Stock to the Representatives for the account of each Underwriter against payment to or upon the order of the Company of the purchase price by wire transfer of immediately available funds. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligation of each Underwriter hereunder. Upon delivery, the Firm Stock shall be registered in such names and in such denominations as the Representatives shall request in writing not less than two full business days prior to the First Delivery Date. For the purpose of expediting the checking and packaging of the certificates for the Firm Stock, the Company shall make the certificates representing the Firm Stock available for inspection and packaging by the Representatives in New York, New York, at least one full business day prior to the First Delivery Date. At any time on or before the thirtieth day after the date of this Agreement, the option granted in Section 2 may be exercised by written notice being given to the Company by the Representatives. Such notice shall set forth the aggregate number of shares of Option Stock as to which the option is being exercised, the names in which the shares of Option Stock are to be registered, the denominations in which the shares of Option Stock are to be issued and the date and time, as determined by the Representatives, when the shares of Option Stock are to be delivered; PROVIDED, 11 HOWEVER, that this date and time shall not be earlier than the First Delivery Date nor earlier than the second business day after the date on which the option shall have been exercised nor later than the fifth business day after the date on which the option shall have been exercised. The date and time the shares of Option Stock are delivered are sometimes referred to as the "Second Delivery Date" and the First Delivery Date and the Second Delivery Date are sometimes each referred to as a "Delivery Date"). Delivery of and payment for the Option Stock shall be made at the place specified in the first sentence of the first paragraph of this Section 4 (or at such other place as shall be determined by agreement between the Representatives and the Company) at 10:00 A.M., New York City time, on the Second Delivery Date. On the Second Delivery Date, the Company shall deliver or cause to be delivered the certificates representing the Option Stock to the Representatives for the account of each Underwriter against payment to or upon the order of the Company of the purchase price by wire transfer of immediately available funds. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligation of each Underwriter hereunder. Upon delivery, the Option Stock shall be registered in such names and in such denominations as the Representatives shall request in the aforesaid written notice. For the purpose of expediting the checking and packaging of the certificates for the Option Stock, the Company shall make the certificates representing the Option Stock available for inspection by the Representatives in New York, New York, at least one full business day prior to the Second Delivery Date. 5. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees: (a) To prepare the Prospectus in a form approved by the Representatives and to file such Prospectus pursuant to Rule 424(b) under the Securities Act not later than Commission's close of business on the second business day following the execution and delivery of this Agreement or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under the Securities Act; to make no further amendment or any supplement to the Registration Statement or to the Prospectus except as permitted herein; to advise the Representatives, promptly after it receives notice thereof, of the time when any amendment to the Registration Statement has been filed or becomes effective or any supplement to the Prospectus or any amended Prospectus has been filed and to furnish the Representatives with copies thereof; to advise the Representatives, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus, of the suspension of the qualification of the Stock for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or the Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus or suspending any such qualification, to use promptly its best efforts to obtain its withdrawal; 12 (b) To furnish promptly to each of the Representatives and to counsel for the Underwriters a signed copy of the Registration Statement as originally filed with the Commission, and each amendment thereto filed with the Commission, including all consents and exhibits filed therewith; (c) To deliver promptly to the Representatives such number of the following documents as the Representatives shall reasonably request: (i) conformed copies of the Registration Statement as originally filed with the Commission and each amendment thereto and, (ii) each Preliminary Prospectus, the Prospectus and any amended or supplemented Prospectus; and, if the delivery of a prospectus is required at any time after the Effective Time in connection with the offering or sale of the Stock or any other securities relating thereto and if, at such time, any events shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or, if for any other reason it shall be necessary to amend or supplement the Prospectus in order to comply with the Securities Act or the Exchange Act, to notify the Representatives and, upon their request, to file such document and to prepare and furnish without charge to each Underwriter and to any dealer in securities as many copies as the Representatives may from time to time reasonably request of an amended or supplemented Prospectus which will correct such statement or omission or effect such compliance; (d) To file promptly with the Commission any amendment to the Registration Statement or the Prospectus or any supplement to the Prospectus that may, in the judgment of the Company or the Representatives, be required by the Securities Act or requested by the Commission; (e) Prior to filing with the Commission any amendment to the Registration Statement or supplement to the Prospectus or any Prospectus pursuant to Rule 424 of the Rules and Regulations, to furnish a copy thereof to the Representatives and counsel for the Underwriters and obtain the consent of the Representatives to the filing; (f) As soon as practicable after the Effective Date, to make generally available to the Company's security holders and to deliver to the Representatives an earnings statement of the Company and PII (which need not be audited) complying with Section 11(a) of the Securities Act and the Rules and Regulations (including, at the option of the Company, Rule 158); (g) For a period of five years following the Effective Date, to furnish to the Representatives copies of all materials furnished by the Company to its shareholders and all public reports and all reports and financial statements furnished by the Company to the Nasdaq National Market or any other quotation system or national securities exchange upon which the Common Stock may be included or listed pursuant to requirements of or agreements with such 13 quotation system or exchange or to the Commission pursuant to the Exchange Act or any rule or regulation of the Commission thereunder; (h) Promptly from time to time to take such action as the Representatives may reasonably request to qualify the Stock for offering and sale under the securities laws of such jurisdictions as the Representatives may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Stock; (i) For a period of 180 days from the date of the Prospectus (the "180-Day Lockup Period"), not to, directly or indirectly, (1) offer for sale, sell, pledge, issue, distribute or otherwise dispose of (or enter into any transaction or device which is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of Common Stock or any securities convertible into or exchangeable for shares of Common Stock, or sell or grant options, rights or warrants with respect to any shares of Common Stock or any securities convertible into or exchangeable for shares of Common Stock, or (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of such shares of Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise, in each case without the prior written consent of Lehman Brothers Inc., except for (i) the issuance of the Stock hereunder, (ii) the issuances of shares of Common Stock in connection with the Share Exchange and the Acquisitions, as described in the Prospectus, (iii) the grant of options or other awards pursuant to the Company's 1997 Stock Compensation Plan, as in effect on the date hereof, and (iv) the issuance of up to 1,500,000 shares of Common Stock in connection with future acquisitions, PROVIDED that each recipient of shares of Common Stock referred to in clause (iii) or (iv) agrees with the Company not to offer for sale, sell or otherwise dispose of (or enter into any transaction or device which is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any of such shares during the 180-Day Lockup Period; and to cause each (A) director, (B) officer, (C) each person or entity (other than PII) who is, prior to the First Closing Date, a shareholder of the Company (if any), and (D) each person or entity who will receive shares of Common Stock in connection with Share Exchange or any of the Acquisitions, to furnish to the Representatives, prior to the First Delivery Date, a letter or letters, in form and substance satisfactory to the Representatives, pursuant to which each such person shall agree not to, directly or indirectly, offer for sale, sell, assign, pledge, issue, distribute, grant any option or enter into any contract for the sale or otherwise transfer or dispose of any shares of Common Stock or any other securities of the Company or any security or other instrument which by its terms is convertible into or exercisable or exchangeable for shares of Common Stock or other securities of the Company, whether now owned or hereafter acquired by such person or entity or with respect to which such person or entity has or hereafter acquires the power of disposition, including, without limitation, any shares of Common Stock issuable under any employee stock option or warrant, during (A) the 180-Day Lockup Period, without the prior written consent of Lehman Brothers Inc., and (B) the period of one year from the date of the Prospectus (the "One- 14 Year Lockup Period"), without the prior written consent of the Company, PROVIDED that the Company will not waive the foregoing restrictions applicable during the One-Year Lockup Period with respect to any shares of Common Stock (or other securities) without first notifying and consulting with Lehman Brothers, Inc.; (j) To apply the net proceeds from the sale of the Stock as set forth in the Prospectus; and (k) Prior to filing with the Commission any reports with respect to the offering and sale of the Stock and the application of the proceeds therefrom as may be required under the Securities Act, the Rules and Regulations, the Exchange Act or the rules and regulations of the Commission thereunder, to furnish a copy thereof to the counsel for the Underwriters and receive and consider its comments thereon, and to deliver promptly to the Representatives a signed copy of each such report filed by it with the Commission. 6. EXPENSES. The Company agrees to pay (a) the costs incident to the authorization, issuance, sale and delivery of the Stock and any taxes payable in that connection; (b) the costs incident to the preparation, printing and filing under the Securities Act of the Registration Statement and any amendments and exhibits thereto; (c) the costs of distributing the Registration Statement as originally filed and each amendment thereto and any post-effective amendments thereof (including, in each case, exhibits), any Preliminary Prospectus, the Prospectus and any amendment or supplement to the Prospectus, all as provided in this Agreement; (d) the costs of producing and distributing this Agreement and any other related documents in connection with the offering, purchase, sale and delivery of the Stock; (e) the filing fees incident to securing any required review by the National Association of Securities Dealers, Inc. of the terms of sale of the Stock; (f) any applicable listing or other fees; (g) the fees and expenses of qualifying the Stock under the securities laws of the several jurisdictions as provided in Section 5(h) and of preparing, printing and distributing a Blue Sky Memorandum, if any (including related fees and expenses of counsel to the Underwriters), (h) all costs and expenses of the Underwriters, including the fees and disbursements of counsel for the Underwriters, incident to the offer and sale of shares of the Stock by the Underwriters to employees and persons having business relationships with the Company, as described in Section 3, (i) all fees and expenses of an independent underwriter; and (j) all other costs and expenses incident to the performance of the obligations of the Company under this Agreement; PROVIDED that, except as provided in this Section 6 and in Section 11, the Underwriters shall pay their own costs and expenses, including the costs and expenses of their counsel, any transfer taxes on the Stock which they may sell and the expenses of advertising any offering of the Stock made by the Underwriters. 7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The respective obligations of the Underwriters hereunder are subject to the accuracy, when made and on each Delivery Date, of the representations and warranties of the Company contained herein, to the performance by the Company of its obligations hereunder, and to each of the following additional terms and conditions: 15 (a) The Prospectus shall have been timely filed with the Commission in accordance with Section 5(a); no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; and any request of the Commission for inclusion of additional information in the Registration Statement or the Prospectus or otherwise shall have been complied with. (b) No Underwriter shall have discovered and disclosed to the Company on or prior to such Delivery Date that the Registration Statement or the Prospectus or any amendment or supplement thereto contains an untrue statement of a fact which, in the opinion of counsel for the Underwriters, is material or omits to state a fact which, in the opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading. (c) All corporate proceedings and other legal matters incident to the authorization, form and validity of this Agreement, the Stock, the Registration Statement and the Prospectus, and all other legal matters relating to this Agreement and the transactions contemplated hereby, shall be reasonably satisfactory in all material respects to counsel for the Underwriters, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters. (d) Jackson Walker L.L.P. shall have furnished to the Representatives its written opinion, as counsel to the Company, addressed to the Underwriters and dated such Delivery Date, in form and substance satisfactory to the Representatives, to the effect that: (i) The Company and PII have been duly incorporated and are validly existing as corporations in good standing under the laws of the State of Delaware, are duly registered and qualified to transact business and are in good standing as foreign corporations in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification (except where the failure to register or qualify would not have a Material Adverse Effect), and have all power and authority necessary to own, lease, operate or hold their respective properties and conduct the businesses in which they are engaged and, to such counsel's knowledge, neither the Company nor PII is in violation of any provision of its charter, by-laws or other organizational documents; (ii) The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company (A) have been duly and validly authorized and issued, (B) are fully paid and nonassessable, (C) have not been issued in violation of any preemptive or similar rights under the Company's charter or by-laws, the laws of the State of Delaware or, to the knowledge of such counsel, otherwise and (D) conform to the description thereof contained in the Prospectus; after giving effect to the Share Exchange and the closing of the Acquisitions and the issuance of the shares of 16 Common Stock contemplated by the Acquisition Agreements, but without giving effect to the issuance of the Stock pursuant to the terms of this Agreement, the Company has issued and outstanding ________ shares of Common Stock and no shares of preferred stock; and all of the issued shares of capital stock of PII (A) have been duly and validly authorized and issued, (B) are fully paid and nonassessable, (C) have not been issued in violation of any preemptive or similar rights under PII's charter or by-laws, the laws of the State of Delaware or, to the knowledge of such counsel, otherwise and (D) after giving effect to the Share Exchange, will be owned directly by the Company, free and clear of all liens, encumbrances, equities or claims; (iii) The shares of the Stock being issued and sold by the Company to the Underwriters on such Delivery Date have been duly and validly authorized and, when issued and delivered against payment therefor as provided in this Agreement, will be duly and validly issued, fully paid and nonassessable and will not have been issued in violation of or be subject to any preemptive or similar rights under the Company's charter or by-laws, the laws of the State of Delaware or, to the knowledge of such counsel, otherwise; (iv) Except as disclosed in the Prospectus, there are no restrictions upon the voting or transfer of any shares of the Stock pursuant to the Company's charter or by-laws, the laws of the State of Delaware or, to the knowledge of such counsel, otherwise; (v) The form of certificate representing shares of Common Stock conforms to the applicable requirements of the Delaware General Corporation Law; (vi) Other than as set forth in the Prospectus, such counsel does not know of any legal or governmental proceedings (domestic or foreign) pending to which the Company or PII is a party or of which any property or assets of the Company or PII is the subject which, if determined adversely to the Company or PII, might, singly or in the aggregate, have a Material Adverse Effect; and such counsel does not know of any such proceedings that are threatened by any governmental authorities or threatened by others; (vii) The Registration Statement was declared effective under the Securities Act, the Prospectus was filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations and, to the knowledge of such counsel after making telephone inquiries to the staff of the Commission on such Delivery Date, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that purpose is pending or threatened by the Commission; (viii) The Registration Statement and the Prospectus and any further amendments or supplements thereto made by the Company prior to such Delivery Date (other than the financial statements and schedules (including the notes thereto and the auditors' reports thereon) and the other financial data included therein and the exhibits thereto, as to which such counsel need express no opinion) appear on their face to have been appropriately 17 responsive in all material respects to the requirements of the Securities Act and the Rules and Regulations; (ix) To the knowledge of such counsel, (i) there are no contracts, indentures, mortgages, loan agreements, notes, leases or other instruments required to be described or referred to in the Registration Statement or to be filed as exhibits thereto other than those described or referred to therein or filed as exhibits thereto and (ii) the descriptions thereof or references thereto are correct; (x) The Company has full corporate power and authority to enter into this Agreement and to issue, sell and deliver the Stock to the Underwriters as provided herein, and this Agreement has been duly authorized, executed and delivered by the Company; (xi) The execution and delivery of this Agreement, the issuance and sale of the shares of Stock being delivered on such Delivery Date by the Company and the compliance by the Company with all of the provisions of this Agreement and the consummation of the transactions contemplated hereby will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or PII is a party or by which the Company or PII is bound or to which any of the property or assets of the Company or PII is subject and which has been filed as an exhibit to the Registration Statement, nor will such actions result in any violation of the provisions of the charter or by-laws of the Company or PII or any statute or any order, rule or regulation known to such counsel of any court or governmental agency or body (whether domestic or foreign) having jurisdiction over the Company or PII or any of their properties or assets, other than (i) state securities laws of the various states or other jurisdictions or (ii) dental regulations (as to which such counsel shall deliver a reasoned opinion as contemplated by Subsection 7(d)(xii) below); and, except for the registration of the Stock under the Securities Act and such consents, approvals, authorizations, registrations or qualifications as may be required under the Exchange Act and applicable state securities laws in connection with the purchase and distribution of the Stock by the Underwriters, no consent, approval, authorization or order of, or filing or registration with, any such court or governmental agency or body is required for the execution, delivery and performance of this Agreement by the Company or the consummation of the transactions contemplated hereby; (xii) The Company has the corporate power and authority to enter into the Transaction Agreements to which it is a party and to perform its obligations thereunder; the execution and delivery of, and the performance by the Company of its obligations under, the Transaction Agreements have been duly and validly authorized by the Company, and each Transaction Agreement has been duly executed and delivered by the Company and is a legal, valid and binding agreement of the Company, enforceable in accordance with its terms, except as that enforceability may be subject to the effect of (A) any applicable bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting creditors' rights 18 generally and (B) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); PROVIDED that the opinion set forth in this subparagraph with respect to enforceability of the Transaction Agreements will be subject to a reasoned analysis of the prohibition against the corporate practice of dentistry in the State of Texas established by the Tex. Health & Safety Code Ann. arts. 4548a and 4551a(8) and the line of analogous court decisions relating to the corporate practice of medicine including FLYNN BROS., INC. V. FIRST MEDICAL ASSOC., 715 S.W.2d 782 (Tex.App.--Dallas 1986, writ ref'd n.r.e.); (xiii) Each of the Acquisitions has been consummated pursuant to the terms of the Acquisition Agreement related thereto; (xiv) The Share Exchange has been completed pursuant to the terms of the Share Exchange Agreement; (xv) The Stock and the shares of Common Stock issued in connection with the Share Exchange and the Acquisitions have been approved for inclusion on the Nasdaq National Market; (xvi) Neither the Company nor any subsidiary is an "investment company" within the meaning of such term under the Investment Company Act of 1940 and the rules and regulations of the Commission thereunder; and (xvii) To such counsel's knowledge, there are no contracts, agreements or understandings between the Company and any person granting such person the right to (i) require the Company to file a registration statement under the Securities Act with respect to any securities of the Company owned or to be owned by such person, (ii) require the Company to include such securities in the securities registered pursuant to the Registration Statement or (iii) except as described in the Prospectus, require that any securities be registered pursuant to any other registration statement filed by the Company under the Securities Act. In rendering such opinion, such counsel may state that its opinion is limited to matters governed by the Federal laws of the United States of America, the laws of the State of Texas and the corporate laws of the State of Delaware. Such counsel shall also have furnished to the Representatives a written statement, addressed to the Underwriters and dated such Delivery Date, in form and substance satisfactory to the Representatives, to the effect that (x) such counsel has acted as counsel to the Company in connection with the preparation of the Registration Statement, and (y) based on the foregoing, no facts have come to the attention of such counsel which lead it to believe that the Registration Statement (other than (i) the financial statements and schedules (including the notes thereto and the auditors' reports thereon) included therein or omitted therefrom and (ii) the other financial information contained therein or omitted therefrom, and it being understood that such counsel is not, by this statement, making any 19 statement as to the accuracy of any statement or representation contained in any exhibit to the Registration Statement), as of the Effective Date, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, or that the Prospectus contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The foregoing opinion and statement may be qualified by a statement to the effect that such counsel does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement or the Prospectus. (e) Kimberlee K. Rozman, general counsel of the Company, shall have furnished to the Representatives her opinion, addressed to the Underwriters and dated such Delivery Date, in form and substance satisfactory to the Representatives, to the effect that: (i) The Company and PII have been duly incorporated and are validly existing as corporations in good standing under the laws of the State of Delaware, are duly registered and qualified to transact business and are in good standing as foreign corporations in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification (except where the failure so to register or qualify would not have a Material Adverse Effect), and have all power and authority necessary to own, lease, operate or hold their respective properties and conduct the businesses in which they are engaged and, to such counsel's knowledge, neither the Company nor PII is in violation of any provision of its charter, by-laws or other organizational documents; (ii) The shares of the Stock being issued and sold by the Company to the Underwriters on such Delivery Date have been duly and validly authorized and, when issued and delivered against payment therefor as provided in this Agreement, will be duly and validly issued, fully paid and nonassessable and will not have been issued in violation of or be subject to any preemptive or similar rights under the Company's charter or by-laws, the laws of the State of Delaware or, to the knowledge of such counsel, otherwise; (iii) There are no restrictions upon the voting or transfer of any shares of the Stock pursuant to the Company's charter or by-laws, the laws of the State of Delaware or, to such counsel's knowledge, otherwise; (iv) To the best of such counsel's knowledge and other than as set forth in the Prospectus, there are no legal or governmental proceedings (domestic or foreign) pending to which the Company or PII is a party or of which any property or assets of the Company or PII is the subject which, if determined adversely to the Company or PII, might, singly or in the aggregate, have a Material Adverse Effect; and, to the best of such counsel's knowledge, no such proceedings are threatened or contemplated by any governmental authorities or threatened by others; 20 (v) The Company has full corporate power and authority to enter into this Agreement and to issue, sell and deliver the Stock to the Underwriters as provided herein, and this Agreement has been duly authorized, executed and delivered by the Company; (vi) The execution and delivery of this Agreement, the issuance and sale of the shares of Stock being delivered on such Delivery Date by the Company and the compliance by the Company with all of the provisions of this Agreement and the consummation of the transactions contemplated hereby will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument known to such counsel to which the Company or PII is a party or by which the Company or PII is bound or to which any of the property or assets of the Company or PII is subject, nor will such actions result in any violation of the provisions of the charter or by-laws of the Company or PII or any statute or any order, rule or regulation known to such counsel of any court or governmental agency or body (whether domestic or foreign) having jurisdiction over the Company or PII or any of their properties or assets, other than state securities laws of the various states or other jurisdictions; and, except for the registration of the Stock under the Securities Act and such consents, approvals, authorizations, registrations or qualifications as may be required under the Exchange Act and applicable state securities laws in connection with the purchase and distribution of the Stock by the Underwriters, no consent, approval, authorization or order of, or filing or registration with, any such court or governmental agency or body is required for the execution, delivery and performance of this Agreement by the Company or the consummation of the transactions contemplated hereby; (vii) The Company has the corporate power and authority to enter into the Transaction Agreements to which it is a party and to perform its obligations thereunder; the execution and delivery of, and the performance by the Company of its obligations under, the Transaction Agreements have been duly and validly authorized by the Company, and each Transaction Agreement has been duly executed and delivered by the Company and is a legal, valid and binding agreement of the Company, enforceable in accordance with its terms, except as that enforceability may be subject to the effect of (A) any applicable bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting creditors' rights generally and (B) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); PROVIDED that the opinion set forth in this subparagraph with respect to enforceability of the Transaction Agreements in each of the applicable jurisdictions may be subject to a reasoned analysis of the prohibition against the corporate practice of dentistry in the applicable jurisdiction, as set forth in an opinion of other counsel delivered as provided in the last paragraph of this Section 7(e); (viii) To the best of such counsel's knowledge, (i) there are no contracts or other documents that are required to be described or referred to in the Prospectus or to be filed as exhibits to the Registration Statement that have not been described or referred to therein or filed as exhibits to the Registration Statement, (ii) the descriptions thereof or references 21 thereto are correct and (iii) no default exists in the due performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other instrument so described, referred to or filed, except for such defaults that would not, singly or in the aggregate, have a Material Adverse Effect; (ix) The Company has full corporate power and authority, and all necessary governmental authorizations, approvals, orders, licenses, certificates, franchises and permits of and from all governmental regulatory officials and bodies (except where the failure so to have any such authorizations, approvals, orders, licenses, certificates, franchises or permits would not, singly or in the aggregate, have a Material Adverse Effect), to own its properties and to conduct its business in the manner described in the Prospectus; (x) The Company's conduct of its business complies in all material respects with the laws and governmental regulations relating to the corporate practice of dentistry in each jurisdiction in which it conducts its business (except where the failure to comply would not, singly or in the aggregate, have a Material Adverse Effect); (xi) Each of the Acquisitions has been consummated pursuant to the terms of the Acquisition Agreement related thereto; (xii) The Share Exchange has been completed pursuant to the terms of the Share Exchange Agreement; (xiii) To the best of such counsel's knowledge, there are no contracts, agreements or understandings between the Company and any person granting such person the right to (i) require the Company to file a registration statement under the Securities Act with respect to any securities of the Company owned or to be owned by such person, (ii) require the Company to include such securities in the securities registered pursuant to the Registration Statement or (iii) except as described in the Prospectus, require that any securities be registered pursuant to any other registration statement filed by the Company under the Securities Act; and (xiv) The statements contained in the Prospectus under the captions "Risk Factors--Absence of Combined Operating History," "Risk Factors--Reliance on Affiliated Practices and Dentists," "Risk Factors--Government Regulation," "Risk Factors--Potential Effect of Shares Eligible for Future Sale on Price of Common Stock," "Risk Factors--Certain Anti-takeover Provisions," "Business--Summary of Terms of Acquisitions," "Business--Service Agreements," "Business--Dentist Agreement," "Business--Dentist Employment Agreements," "Business--Litigation and Insurance," "Business--Government Regulation," "Management--Executive Compensation," "Management--Employment Agreements," "Management--1997 Stock Compensation Plan," "Certain Transactions," "Description of Capital Stock," "Shares Eligible for Future Sale" and "Underwriting," and in Items 14 and 22 15 of Part II of the Registration Statement, insofar as such statements purport to summarize the provisions of the documents or agreements referred to therein or matters of law or legal conclusions, are true and correct in all material respects and constitute a fair summary thereof. In rendering such opinion, such counsel may rely, to the extent she considers such reliance appropriate, upon the opinion of other counsel retained by her or the Company (which may include local counsel referred to in Section 7(f)), PROVIDED that such other counsel is satisfactory to counsel for the Underwriters, furnishes a copy of its opinion to the Representatives and specifically addresses such opinion to the Representatives. Such counsel shall also have furnished to the Representatives a written statement, addressed to the Underwriters and dated such Delivery Date, in form and substance satisfactory to the Representatives, to the effect that (x) she has acted as general counsel of the Company since its inception and, as such, is familiar with the Company, its operations and the terms and conditions of the Acquisitions and the Service Agreements and has acted as general counsel of the Company in connection with the preparation of the Registration Statement and (y) based on the foregoing, no facts have come to her attention which lead her to believe that the Registration Statement (other than the financial statements and schedules (including the notes thereto and the auditors' reports thereon) included therein or omitted therefrom, and it being understood that such counsel is not, by this statement, making any statement as to the accuracy of any statement or representation contained in any exhibit to the Registration Statement), as of the Effective Date, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, or that the Prospectus contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. (f) The Representatives shall have received from local counsel to the Company licensed to practice in each jurisdiction in which a PA Affiliate is organized or doing business, which local counsel shall be satisfactory to the Representatives, such opinions, dated such Delivery Date and expressly addressed to the Representatives, on behalf of the Underwriters, each in substantially the form of the opinion letter set forth in Exhibit A hereto, with such changes thereto as shall be acceptable to the Representatives. The Representatives shall have received from local counsel to each of the PA Affiliates licensed to practice in each jurisdiction in which a PA Affiliate is organized or doing business, which local counsel shall be satisfactory to the Representatives, such opinions, dated such Delivery Date and expressly addressed to the Representatives, on behalf of the Underwriters, each in substantially the form of the opinion letter set forth in Exhibit B hereto, with such changes thereto as shall be acceptable to the Representatives. (g) The Representatives shall have received from Baker & Botts, L.L.P., counsel for the Underwriters, such opinion or opinions, dated such Delivery Date, with respect to the issuance and sale of the Stock, the Registration Statement, the Prospectus and other related matters as 23 the Representatives may reasonably require, and the Company shall have furnished to such counsel such documents as they reasonably request for the purpose of enabling them to pass upon such matters. (h) At the time of execution of this Agreement, the Representatives shall have received from Coopers & Lybrand LLP a letter, in form and substance satisfactory to the Representatives, addressed to the Underwriters and dated the date hereof, (i) confirming that they are independent public accountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the date hereof (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Prospectus, as of a date not more than five days prior to the date hereof), the conclusions and findings of such firm with respect to the financial information and other matters ordinarily covered by accountants' "comfort letters" to underwriters in connection with registered public offerings. (i) With respect to the letter of Coopers & Lybrand LLP referred to in the preceding paragraph and delivered to the Representatives concurrently with the execution of this Agreement (the "initial letter"), the Company shall have furnished to the Representatives a letter (the "bring-down letter") of such accountants, addressed to the Underwriters and dated such Delivery Date, (i) confirming that they are independent public accountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the date of the bring-down letter (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Prospectus, as of a date not more than five days prior to the date of the bring-down letter (PROVIDED that such date shall not be prior to the Effective Date)), the conclusions and findings of such firm with respect to the financial information and other matters covered by the initial letter and (iii) confirming in all material respects the conclusions and findings set forth in the initial letter. (j) The Company shall have furnished to the Representatives a certificate, dated such Delivery Date, of its Chairman of the Board or its President and Chief Executive Officer and its Chief Financial Officer stating that: (i) The representations, warranties and agreements of the Company in Section 1 are true and correct as of such Delivery Date; the Company has complied with all of its agreements contained herein; and the conditions set forth herein have been fulfilled; and (ii) They have carefully examined the Registration Statement and the Prospectus and, in their opinion (A) as of the Effective Date, the Registration Statement and Prospectus did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, 24 and (B) since the Effective Date, no event has occurred which should have been set forth in a supplement or amendment to the Registration Statement or the Prospectus. (k) (i) None of the Company, PII or the PA Affiliates shall have sustained since the date of the latest audited financial statements included in the Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus, or (ii) since such date there shall not have been any material change in the capital stock or long-term or short-term debt of the Company, PII or any of the PA Affiliates or any change, or any development involving a prospective change, in or affecting the general affairs, management, consolidated financial position, stockholders' equity, results of operations or prospects of the Company and PII, otherwise than as set forth or contemplated in the Prospectus, the effect of which, in any such case described in clause (i) or (ii), is, in the judgment of the Representatives so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Stock being delivered on such Delivery Date on the terms and in the manner contemplated in the Prospectus. (l) Subsequent to the execution and delivery of this Agreement, there shall not have occurred any of the following: (i) trading in securities generally on the New York Stock Exchange or the American Stock Exchange or in the over-the-counter market, or trading in any securities of the Company on any exchange or in the over-the-counter market, shall have been suspended or minimum prices shall have been established on any such exchange or such market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction, (ii) a banking moratorium shall have been declared by Federal or state authorities, (iii) the United States shall have become engaged in hostilities, there shall have been an escalation in hostilities involving the United States or there shall have been a declaration of a national emergency or war by the United States or (iv) there shall have occurred such a material adverse change in general economic, political or financial conditions (or the effect of international conditions on the financial markets in the United States shall be such) as to make it, in the judgment of the Representatives or a majority in interest of the several Underwriters, impracticable or inadvisable to proceed with the public offering or delivery of the Stock being delivered on such Delivery Date on the terms and in the manner contemplated in the Prospectus. (m) The Stock, together with the shares of Common Stock issued or to be issued in connection with the Share Exchange and the Acquisitions, shall have been approved for inclusion on the Nasdaq National Market. (n) The Share Exchange shall have been completed pursuant to the terms of the Share Exchange Agreement. 25 (o) The Acquisitions shall have been consummated on the terms set forth in the Registration Statement and the Acquisition Agreements, without waiver or modification of any material terms or provisions of any Acquisition Agreement, except as may be approved by the Representatives. All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Underwriters. 8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company (including, for purposes of this Section 8, any subsidiaries of the Company) shall indemnify and hold harmless each Underwriter, its officers and employees and each person, if any, who controls any Underwriter within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to purchases and sales of Stock), to which that Underwriter, officer, employee or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any Preliminary Prospectus, the Registration Statement or the Prospectus or in any amendment or supplement thereto or (B) in any blue sky application or other document prepared or executed by the Company (or based upon any written information furnished by the Company) specifically for the purpose of qualifying any or all of the Stock under the securities laws of any state or other jurisdiction (any such application, document or information being hereinafter called a "Blue Sky Application"), (ii) the omission or alleged omission to state in any Preliminary Prospectus, the Registration Statement or the Prospectus, or in any amendment or supplement thereto, or in any Blue Sky Application any material fact required to be stated therein or necessary to make the statements therein not misleading or (iii) any act or failure to act or any alleged act or failure to act by any Underwriter in connection with, or relating in any manner to, the Stock or the offering contemplated hereby, and which is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon matters covered by clause (i) or (ii) above (PROVIDED that the Company shall not be liable under this clause (iii) to the extent that it is determined in a final judgment by a court of competent jurisdiction that such loss, claim, damage, liability or action resulted directly from any such acts or failures to act undertaken or omitted to be taken by such Underwriter through its gross negligence or willful misconduct), and shall reimburse each Underwriter and each such officer, employee or controlling person promptly upon demand for any legal or other expenses reasonably incurred by that Underwriter, officer, employee or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred; PROVIDED, HOWEVER, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in any 26 Preliminary Prospectus, the Registration Statement or the Prospectus, or in any such amendment or supplement, or in any Blue Sky Application, in reliance upon and in conformity with written information concerning such Underwriter furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for inclusion therein. The foregoing indemnity agreement is in addition to any liability which the Company may otherwise have to any Underwriter or to any officer, employee or controlling person of that Underwriter. (b) Each Underwriter, severally and not jointly, shall indemnify and hold harmless the Company, its officers and employees, each of its directors (including any person who, with his or her consent, is named in the Registration Statement as about to become a director of the Company), and each person, if any, who controls the Company within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company or any such director, officer or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any Preliminary Prospectus, the Registration Statement or the Prospectus or in any amendment or supplement thereto, or (B) in any Blue Sky Application or (ii) the omission or alleged omission to state in any Preliminary Prospectus, the Registration Statement or the Prospectus, or in any amendment or supplement thereto, or in any Blue Sky Application any material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning such Underwriter furnished to the Company through the Representatives by or on behalf of that Underwriter specifically for inclusion therein, and shall reimburse the Company and any such director, officer or controlling person for any legal or other expenses reasonably incurred by the Company or any such director, officer or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred. The foregoing indemnity agreement is in addition to any liability which any Underwriter may otherwise have to the Company or any such director, officer, employee or controlling person. (c) Promptly after receipt by an indemnified party under this Section 8 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the claim or the commencement of that action; PROVIDED, HOWEVER, that the failure to notify the indemnifying party shall not relieve it from any liability that it may have under this Section 8 except to the extent it has been materially prejudiced by such failure and, PROVIDED FURTHER, that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under this Section 8. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate 27 therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 8 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; PROVIDED, HOWEVER, that the Representatives shall have the right to employ counsel to represent jointly the Representatives and those other Underwriters and their respective officers, employees and controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Underwriters against the Company under this Section 8 if, in the reasonable judgment of the Representatives, it is advisable for the Representatives and those Underwriters, officers, employees and controlling persons to be represented by separate counsel, and, in that event, the fees and expenses of such separate counsel (in addition to the fees and expenses of any local counsel) shall be paid by the Company. No indemnifying party shall (i) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes a full and unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding, or (ii) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with the consent of the indemnifying party or if there be a final judgment of the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. (d) If the indemnification provided for in this Section 8 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 8(a) or 8(b) in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters, on the other, from the offering of the Stock or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Underwriters, on the other, with respect to the statements or omissions which resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Underwriters, on the other, with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Stock purchased under this Agreement (before deducting expenses) received by 28 the Company, on the one hand, and the total underwriting discounts and commissions received by the Underwriters with respect to the shares of the Stock purchased under this Agreement, on the other hand, bear to the total gross proceeds from the offering of the shares of the Stock under this Agreement, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 8(d) were to be determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 8(d) shall be deemed to include, for purposes of this Section 8(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8(d), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Stock underwritten by it and distributed to the public was offered to the public exceeds the amount of any damages which such Underwriter has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute as provided in this Section 8(d) are several in proportion to their respective underwriting obligations and not joint. (e) The Underwriters severally confirm that the statements with respect to the public offering of the Stock by the Underwriters set forth on the cover page of, the legend concerning over-allotments on the inside front cover page of, and the concession and reallowance figures appearing under the caption "Underwriting" in, the Prospectus are correct, and the Underwriters and the Company agree that such information constitutes the only information concerning any of the Underwriters furnished in writing to the Company by or on behalf of any of the Underwriters specifically for inclusion in the Registration Statement and the Prospectus. 9. DEFAULTING UNDERWRITERS. If, on either Delivery Date, any Underwriter defaults in the performance of its obligations under this Agreement, the remaining non-defaulting Underwriters shall be obligated to purchase the Stock that the defaulting Underwriter agreed but failed to purchase on such Delivery Date in the respective proportions which the number of shares of the Firm Stock set opposite the name of each remaining non-defaulting Underwriter in Schedule 1 hereto bears to the total number of shares of the Firm Stock set opposite the names of all the remaining non-defaulting Underwriters in Schedule 1 hereto; PROVIDED, HOWEVER, that the remaining non-defaulting Underwriters shall not be obligated 29 to purchase any of the Stock on such Delivery Date if the total number of shares of the Stock which the defaulting Underwriter or Underwriters agreed but failed to purchase on such date exceeds 9.09% of the total number of shares of the Stock to be purchased on such Delivery Date, and any remaining non-defaulting Underwriter shall not be obligated to purchase more than 110% of the number of shares of the Firm Stock that it agreed to purchase on such Delivery Date pursuant to the terms of Section 2. If the foregoing maximums are exceeded, the remaining non-defaulting Underwriters, or those other underwriters satisfactory to the Representatives who so agree, shall have the right, but shall not be obligated, to purchase, in such proportion as may be agreed upon among them, all of the Stock to be purchased on such Delivery Date. If the remaining Underwriters or other underwriters satisfactory to the Representatives do not elect to purchase the shares which the defaulting Underwriter or Underwriters agreed but failed to purchase on such Delivery Date, this Agreement (or, with respect to the Second Delivery Date, the obligation of the Underwriters to purchase, and of the Company to sell, the Option Stock) shall terminate without liability on the part of any non-defaulting Underwriter or the Company, except that the Company will continue to be liable for the payment of expenses to the extent set forth in Sections 6 and 11. As used in this Agreement, the term "Underwriter" includes, for all purposes of this Agreement unless the context requires otherwise, any party not listed in Schedule 1 hereto who, pursuant to this Section 9, purchases Firm Stock which a defaulting Underwriter agreed but failed to purchase. Nothing contained herein shall relieve a defaulting Underwriter of any liability it may have to the Company for damages caused by its default. If other underwriters are obligated or agree to purchase the Stock of a defaulting or withdrawing Underwriter, either the Representatives or the Company may postpone the Delivery Date for up to seven full business days in order to effect any changes that in the opinion of counsel for the Company or counsel for the Underwriters may be necessary in the Registration Statement, the Prospectus or in any other document or arrangement. 10. TERMINATION. The obligations of the Underwriters hereunder may be terminated by the Representatives by notice given to and received by the Company prior to delivery of and payment for the Firm Stock if, prior to that time, any of the events described in Sections 7(k) or 7(l), shall have occurred or if the Underwriters shall decline to purchase the Stock for any reason permitted under this Agreement. 11. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the Company shall fail to tender the Stock for delivery to the Underwriters by reason of any failure, refusal or inability on the part of the Company to perform any agreement on its part to be performed, or because any other condition of the Underwriters' obligations hereunder required to be fulfilled by the Company is not fulfilled, the Company will reimburse the Underwriters for all reasonable out-of-pocket expenses (including fees and disbursements of counsel) incurred by the Underwriters in connection with this Agreement and the proposed purchase of the Stock and, upon demand, the Company shall pay the full amount thereof to the Representatives. If this Agreement is terminated pursuant to Section 9 by reason of the default of one or more Underwriters, the Company shall not be obligated to reimburse any defaulting Underwriter on account of those expenses. 30 12. NOTICES, ETC. All statements, requests, notices and agreements hereunder shall be in writing, and: (a) if to the Underwriters, shall be delivered or sent by mail, telex or facsimile transmission to Lehman Brothers Inc., Three World Financial Center, New York, New York 10285, Attention: Syndicate Department (Facsimile No.: 212-526-6588), with a copy, in the case of any notice pursuant to Section 8(c), to the Director of Litigation, Office of the General Counsel, Lehman Brothers Inc., Three World Financial Center, 10th Floor, New York, New York 10285; (b) if to the Company, shall be delivered or sent by mail, telex or facsimile transmission to the address of the Company set forth in the Registration Statement, Attention: Gary S. Glatter (Facsimile No.: 602-952-0544); PROVIDED, HOWEVER, that any notice to an Underwriter pursuant to Section 8(c) shall be delivered or sent by mail, telex or facsimile transmission to such Underwriter at its address set forth in its acceptance telex to the Representatives, which address will be supplied to any other party hereto by the Representatives upon request. Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof. The Company shall be entitled to act and rely upon any request, consent, notice or agreement given or made on behalf of the Underwriters by Lehman Brothers Inc. on behalf of the Representatives. 13. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure to the benefit of and be binding upon the Underwriters, the Company, and their respective successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except that (a) the representations, warranties, indemnities and agreements of the Company contained in this Agreement shall also be deemed to be for the benefit of the person or persons, if any, who control any Underwriter within the meaning of Section 15 of the Securities Act for the benefit of each and (b) the indemnity agreement of the Underwriters contained in Section 8(c) of this Agreement shall be deemed to be for the benefit of directors of the Company, officers of the Company who have signed the Registration Statement and any person controlling the Company within the meaning of Section 15 of the Securities Act. Nothing in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this Section 13, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. 14. SURVIVAL. The respective indemnities, representations, warranties and agreements of the Company and the Underwriters contained in this Agreement or made by or on behalf on them, respectively, pursuant to this Agreement, shall survive the delivery of and payment for the Stock and shall remain in full force and effect, regardless of any investigation made by or on behalf of any of them or any person controlling any of them. 31 15. DEFINITION OF THE TERMS "BUSINESS DAY" AND "SUBSIDIARY." For purposes of this Agreement, (a) "business day" means any day on which the New York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the meaning set forth in Rule 405 of the Rules and Regulations. 16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK. 17. COUNTERPARTS. This Agreement may be executed in one or more counterparts and, if executed in more than one counterpart, the executed counterparts shall each be deemed to be an original but all such counterparts shall together constitute one and the same instrument. 18. HEADINGS. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement. 32 If the foregoing correctly sets forth the agreement between the Company and the Underwriters, please indicate your acceptance in the space provided for that purpose below. Very truly yours, PENTEGRA DENTAL GROUP, INC. By: --------------------------------------- Gary S. Glatter President and Chief Executive Officer Accepted: LEHMAN BROTHERS INC. RAUSCHER PIERCE REFSNES, INC. For themselves and as Representatives of the several Underwriters named in Schedule I hereto By LEHMAN BROTHERS INC. By: ----------------------------------- AUTHORIZED REPRESENTATIVE 33 EX-2.7 3 EXHIBIT 2.7 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., and JAMES P. ALLEN, D.D.S. TABLE OF CONTENTS Page ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. . . . . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. 2.1 EXISTENCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. . . . . . . . . . . 3 2.4 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 [INTENTIONALLY DELETED]. . . . . . . . . . . . . . . . . . . . . . . . 3 2.6 [INTENTIONALLY DELETED]. . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 DENTIST'S FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . 3 2.8 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.9 CONDITION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. . . . . . . . . . . . . . . . . 3 2.11 INVENTORIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. . . . . . . . . . . . . . . . . . 3 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES . . . . . . . . 4 2.14 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.16 SUBSEQUENT EVENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.19 LIABILITIES; DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.20 INSURANCE POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.21 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . 6 2.22 ADVERSE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.23 COMPLIANCE WITH LAWS IN GENERAL. . . . . . . . . . . . . . . . . . . . 7 2.24 THIRD PARTY PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.25 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . 7 2.26 BANKING RELATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS . . . . . . . . 8 2.28 PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING . . . . . . . . . . . . . . . . . . 8 3.2 POWER AND AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.3 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.4 CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.5 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 4. COVENANTS OF DENTIST. 4.1 CONSUMMATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . 9 4.2 BUSINESS OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.3 ACCESS AND NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. . . . . . . . . . 9 4.5 ACQUISITION PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . . 9 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . 9 4.7 EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.8 [INTENTIONALLY OMITTED]. . . . . . . . . . . . . . . . . . . . . . . . 10 4.9 REQUIREMENTS TO EFFECT ACQUISITION . . . . . . . . . . . . . . . . . . 10 4.10 ACCOUNTING AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . 10 4.11 WAIVER OF BULK TRANSFER COMPLIANCE . . . . . . . . . . . . . . . . . . 10 4.12 LEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.13 HIRING OF EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.14 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . 10 4.15 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.16 FORMATION OF THE PRACTICE. . . . . . . . . . . . . . . . . . . . . . . 10 4.17 CORPORATE RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.18 POWER AND AUTHORITY FOR TRANSACTIONS . . . . . . . . . . . . . . . . . 11 4.19 NO BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.20 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . . 11 SECTION 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . 11 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. . . . . . . . . . 11 SECTION 6. COVENANTS OF PENTEGRA AND DENTIST 6.1 FILINGS; OTHER ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 12 7.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 12 7.3 PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.4 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . 12 7.5 DUE DILIGENCE REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.6 APPROVAL BY THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . 12 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. . . . . . . . . . . . . . . . . 13 7.8 EMPLOYMENT ARRANGEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.12 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.13 NO CHANGE IN WORKING CAPITAL . . . . . . . . . . . . . . . . . . . . . 13 7.14 SECURITIES APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 8. DENTIST'S CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 13 8.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 13 8.3 PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.4 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.5 SECURITIES APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 9. CLOSING DELIVERIES 9.1 DELIVERIES OF DENTIST. . . . . . . . . . . . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . 15 10.2 INDEMNIFICATION BY PENTEGRA. . . . . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY DENTIST . . . . . . . . . . . . . . . . . . . . . . 16 10.4 INDEMNIFICATION PROCEDURE. . . . . . . . . . . . . . . . . . . . . . . 17 10.5 RIGHT OF SETOFF. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 11. TERMINATION SECTION 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 18 12.2 INVESTMENTS; COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION. . . . . . . . . . . . . . . . . . . . . 19 SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION SECTION 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . 20 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . 21 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . 21 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . 21 14.12 NO RULE OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . 21 14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.15 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.16 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra") and JIM ALLEN, D.D.S. ("Dentist"). WITNESSETH: WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires to receive from Dentist, certain assets of Dentist; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Dentist, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P. or in such other manner as is mutually agreed upon by the parties, on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Dentist shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Dentist's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Dentist shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Dentist contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Dentist the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Dentist, including, but not limited to, liabilities arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by Dentist which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Dentist reflected on the books of Dentist at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Dentist, any licensed professional employee or independent contractor of Dentist, (vi) any liability for the payment of any taxes of Dentist, including without limitation, transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Dentist. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Dentist shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. Dentist hereby represents and warrants to Pentegra as follows: 2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the State of New York. Dentist does not have any assets, employees or offices relating to the Business in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Dentist and constitute or will constitute the legal, valid and binding obligations of Dentist in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Dentist is a party or by which Dentist is bound, or violate any material restrictions of any kind to which Dentist is subject, or result in any lien or encumbrance on any of the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Dentist, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Dentist. 2.5 [intentionally deleted]. 2.6 [intentionally deleted]. 2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for the Business for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of the Business as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Dentist relating to the Business. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Dentist leases, as lessor or lessee, real or personal property used in operating the Business or related to the Assets. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Dentist, as lessor or lessee, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Dentist has not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Dentist has no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Dentist, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Dentist has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items which are used by the Dentist in the Business. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Dentist relating to the business of dentistry, including the names of any entities from whom Dentist previously acquired significant assets related to the business of dentistry. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Dentist in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Dentist has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the most recent payroll report of Dentist, showing all current employees of Dentist relating to the Business or the practice of dentistry and their current levels of compensation, (b) promised increases in compensation of employees of Dentist relating to the Business or the practice of dentistry that have not yet been effected, (c) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Dentist is a party and which relate to the Business, copies of which have been delivered to Pentegra, and (d) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Dentist is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Dentist has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Dentist, and Dentist has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the Assets is subject to any pending, nor does Dentist have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Dentist, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Dentist, no basis for any such action exists, nor is there any legal impediment of which Dentist has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Dentist ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Dentist, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default by Dentist. Dentist has no knowledge of any default by any other party to such Contracts. Dentist has not received notice of the intention of any party to any Contract to cancel or terminate any Contract and has no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party to any material written or oral agreement, contract, lease or arrangement relating to the Assets or the Business, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Dentist, oral or written, that provide for prepayments or deferred installment payments (other than in the ordinary course of business consistent with past practices); or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Dentist on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist has not, since the Balance Sheet Date and in connection with the Business: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (d) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (e) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Dentist since the Balance Sheet Date; (f) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (g) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (h) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (i) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (j) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (k) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting the Business or the Assets, or experienced any other material adverse change in the financial condition, assets, prospects, liabilities or business of the Business; or (l) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Dentist has not received any notice that any tax deficiency or delinquency has been or may be asserted against Dentist. There are no audits relating to taxes of Dentist pending or in process or, to the knowledge of Dentist, threatened. Dentist is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the Assets. Dentist has withheld and paid all taxes required by law to have been withheld and paid by it. Dentist is not and has not been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Dentist has delivered to Pentegra correct and complete copies of Dentist's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Dentist during the three calendar year period preceding the date of this Agreement. Dentist has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Dentist does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Nothing contained herein shall prohibit Dentist from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Dentist resulting from any action taken by Dentist or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet or as set forth on EXHIBIT 2.19, Dentist did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature related to the Business, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business of the Business. Dentist does not know, or have reasonable grounds to know, of any basis for the assertion against Dentist as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Dentist related to the Business (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is included on the Balance Sheet or is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Dentist has not received notice or other communication from the issuer of any such insurance policy canceling or amending such policy or threatening to do so. Neither Dentist nor any licensed professional employee of Dentist has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Dentist has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Dentist has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Dentist Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Dentist Plans. Dentist has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Dentist Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Dentist or any licensed professional employee of Dentist of any Federal, state or local law or regulation. Dentist has not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Dentist. 2.24 THIRD PARTY PAYORS. Dentist and each licensed professional employee or independent contractor of Dentist has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Dentist and each licensed professional employee of Dentist. Neither Dentist nor any licensed professional employee of Dentist has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Dentist and Dentist's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by Dentist or to be furnished by Dentist to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Dentist has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or family member of Dentist, or their respective spouses, children or affiliates, and to the best of Dentist's knowledge, no employee of dentist, or such employee's respective spouse, childrenor affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of the Business or any organization that has a material contract or arrangement with Dentist relating to the Business. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Dentist's services which accounted for more than 10% of revenues of the Business in the preceding fiscal year. Dentist has good relations with all such payors and other material payors of the Business and none of such payors has notified Dentist that it intends to discontinue its relationship with Dentist or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Dentist as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Pentegra or waivers thereof in all jurisdictions where Pentegra is or will perform services, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 Legal Proceedings. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF DENTIST. Dentist agrees that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Dentist agrees to complete the Exhibits hereto to be provided by him in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the Assets in the ordinary course. Dentist shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Dentist shall use his best efforts to preserve the Business and Assets intact and shall not take any action that would have a material adverse effect on the Business or Assets. Dentist shall use his best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Dentist. Dentist shall collect its receivables and pay its trade payables in the ordinary course of business. Dentist shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Dentist as the same relates to the Business or the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the Business or the Assets, as Pentegra or its representatives may request. Dentist shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Dentist is a party or relating to the Business or the Assets, and (b) any adverse change in Dentist's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall use his best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Dentist shall not, and shall use its best efforts to cause Dentist's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to the Dentist, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Dentist or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Dentist will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Dentist shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Dentist or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Dentist to any employee or other person or entity (including, without limitation, any Dentist Plan and any liability under employment contracts with Dentist) allocable to services performed prior to the Closing Date. Dentist acknowledges that the purpose and intent of this covenant is to assure that Pentegra shall have no liability whatsoever at any time after the Closing Date with respect to any of Dentist's employees or similar persons or entities, including, without limitation any Dentist Plan, for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of the Dentist (other than in the ordinary course of business) or other employee or an independent contractor of Dentist, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Dentist, the Business or the Assets. 4.8 [INTENTIONALLY OMITTED]. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material respect the tax or financial accounting methods or practices followed by Dentist (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Dentist will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Dentist required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Dentist covenants and agrees that all of the creditors with respect to the Business and the Assets will be paid in full by Dentist prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Dentist may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Dentist agrees to indemnify Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Dentist leases any of its premises from the Dentist or other affiliate of Dentist, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Dentist designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Dentist shall remain liable under any Dentist Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Dentist's employees incurred by Dentist prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and shall be treated as Clinic employees for purposes of eligibility and participation in Dentist Plans. 4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the Dentist and the Practice are to practice dentistry. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Dentist shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall qualify to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance reasonably satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and has filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND DENTIST. Pentegra and Dentist agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, at its sole cost and expense, shall promptly prepare and file with the Securities and Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra, at its sole cost and expense, shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Dentist shall furnish all information concerning Dentist as may be reasonable requested in connection with any such action. Dentist represents and warrants that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any mateial fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Dentist shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Dentist shall furnish Pentegra will all information concerning itself and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. 6.2 SALES TAX. Notwithstanding any provision herein to the contrary, Pentegra hereby covenants and agrees to pay any and all sales and/or use taxes due and owing as a result of the transactions contemplated by this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Dentist contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Dentist prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of the Business or Assets shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Dentist shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Dentist shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her employment agreement and executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra. 7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Dentist and its affiliates relating to the Business or Assets, and Dentist shall not have any liabilities relating to the Business, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured on its liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Dentist since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act (the "Effective Date") and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. DENTIST'S CONDITIONS PRECEDENT. The obligations of Dentist hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly executed in form satisfactory to Dentist and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF DENTIST. Within five business days after requested by Pentegra, Dentist shall deliver to Pentegra the following, all of which shall be in a form reasonably satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a bill of sale conveying the Assets to Pentegra; (d) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (e) certificates of Dentist dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Dentist contained herein; (ii) as to the performance of and compliance by Dentist with all covenants contained herein; and (iii) certifying that all conditions precedent of Dentist to the Closing have been satisfied; (f) an opinion of counsel to Dentist opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Dentist, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (g) non-foreign affidavits executed by Dentist; (h) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (i) an executed Registration Rights Agreement between Pentegra and Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (j) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Dentist the following, all of which shall be in a form reasonably satisfactory to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Dentist; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Dentist; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Dentist to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Dentist or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of three (3) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS PRIOR TO THE CLOSING DATE, (C) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES (OTHER THAN PENTEGRA) OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (D) TAXES (OTHER THAN SALES AND USE TAXES) OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (E) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (F) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (G) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (H) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS COUNSEL IN WRITING BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. Except with respect to the failure of Pentegra to satisfy the payment of the Acquisition Consideration, the parties hereto hereby acknowledge and agree that the indemnification rights of the parties under this Section 10 and equitable remedies, including without limitation, injunctive relief, represent the sole and exclusive remedies that the parties hereto have with respect to the breach of any representation, warranty or covenant set forth in this Agreement. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Dentist giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. In the event of any breach of warranty, representation, covenant or agreement by Pentegra giving rise to indemnification under Section 10.2 or 10.4 hereof, Dentist shall be entitled to offset the amount of damages actually incurred by it as a result of such breach of a warranty, representation or covenant or agreement against any amounts payable by Dentist or the Practice, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Dentist contained in this Agreement or in any certificate or other document executed and delivered by Dentist pursuant to this Agreement is or becomes untrue or breached in any material respect or if Dentist fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Dentist if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra or Dentist if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Dentist, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Dentist pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the shares of Pentegra Common Stock to be delivered to Dentist pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933, and may not be resold without compliance with the Securities Act of 1933, as amended or an exemption thereunder. The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Dentist covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Dentist resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect its own interests in connection with the acquisition of the Pentegra Common Stock. Dentist and its representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Dentist and its representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Dentist is an "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes and acknowledges that it had in the past, currently has, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Dentist agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Dentist, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Dentist shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto, at their sole cost and expense, with the opportunity to contest such disclosure, (iii) Dentist reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Dentist is the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Dentist from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Dentist and Pentegra shall be filed in a manner consistent with such intention and Dentist and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Dentist: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to Section 14.13, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Dentist for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Dentist. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Dentist, be relieved from its obligations to Dentist under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Dentist, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a pro rata portion of all taxes (other than sales and use taxes) levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman -------------------------------- Its: Senior Vice President /s/ James P. Allen ------------------------------------ James P. Allen, D.D.S. INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 [intentionally omitted] 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.8 4 EXHIBIT 2.8 AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG PENTEGRA DENTAL GROUP, INC., Walter J. Anderson, D.D.S., Donald H. Plotkin, D.D.S., William H. Swilley, D.D.S., William A. Cerny, D.D.S. and Graham A. Satchell, D.D.S., Inc. dba Anderson Dental Group and Walter J. Anderson, D.D.S., Donald H. Plotkin, D.D.S., William A. Cerny, D.D.S., Brian M. Ellis, D.D.S., Afshan Kaviani, D.D.S. TABLE OF CONTENTS Page ---- Section 1. TERMS OF THE REORGANIZATION 1.2 MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 CERTIFICATE OF INCORPORATION; BYLAWS . . . . . . . . . . . . . . . . . 2 1.7 SUBSEQUENT ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING . . . . . . . . . . . . . . . . . . 3 2.2 POWER AND AUTHORITY FOR TRANSACTIONS . . . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. . . . . . . . . . . 3 2.4 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES. . . . . . . . . . . . . . . . . . . . . 3 CORPORATE RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . 4 COMPANY'S FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . 4 2.8 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. . . . . . . . . . . . . . . . . 4 2.11 INVENTORIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 INTELLECTUAL PROPERTY RIGHTS; NAMES. . . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES . . . . . . . . 4 2.14 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.15 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.17 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.18 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL. . . . . . . . . . . . . . . . . . . . 8 THIRD PARTY PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS . . . . . . . . 9 2.28 PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING . . . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS. . . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. . . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.6 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . 11 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . 11 4.11 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . 12 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . 13 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . 13 Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . 13 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . 13 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . 13 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . 14 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . 14 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . 14 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . 14 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . 14 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . 14 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . 14 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . 14 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . 15 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . 15 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF COMPANY AND SIGNATORY SHAREHOLDERS. . . . . . . . . . . . 15 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . 17 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . 17 10.3 INDEMNIFICATION BY COMPANY AND SIGNATORY SHAREHOLDERS . . . . . . . . 18 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . 19 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . 20 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . 20 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . 20 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . 22 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . 23 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . 23 14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . 23 14.12 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 23 14.13 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.14 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.15 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.16 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), Walter J. Anderson, D.D.S., Donald H. Plotkin, D.D.S., William H. Swilley, D.D.S., William A. Cerny, D.D.S. and Graham A. Satchell, D.D.S., Inc. dba Anderson Dental Group ("Company") and Walter Anderson, D.D.S., Donald H. Plotkin, D.D.S., William A. Cerny, D.D.S., Brian Ellis, D.D.S., and Afshan Kaviani, D.D.S. (all referred to herein jointly and severally in the singular as "Signatory Shareholder" or "Signatory Shareholders"). WITNESSETH: WHEREAS, Company operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, the Boards of Directors and the signatory shareholders of the Company and Pentegra have determined that a reorganization between each of them is in the best interests of their respective companies; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Company, the "Target Companies") and simultaneously with the closing of the reorganization contemplated herein, intends to consummate its initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock"); WHEREAS, it is intended for Federal income tax purposes that the reorganization contemplated by this Agreement shall qualify as an reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. . NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE REORGANIZATION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". Nothing herein will require that any of the parties to this Agreement shall be required to be present in person at the closing. 1.2 MERGER. Subject to and upon the terms and conditions contained herein, on the Closing Date, the Company shall be merged with and into Pentegra (or its designated affiliate, in which case, the references herein to Pentegra shall be to such designated affiliate and its shares of common stock) in accordance with this Agreement and the separate corporate existence of the Company shall thereupon cease ("Merger"). Pentegra shall be the surviving corporation in the Merger ("Surviving Corporation") and shall continue to be governed by the laws of the State of Delaware and the separate corporate existence of Pentegra with all rights, privileges, powers, immunities and purposes shall continue unaffected by the Merger, provided that all corporate laws of the State of Texas have been complied with by Company and Pentegra in the termination of the Company. The Merger shall have the effects specified in the Delaware General Corporation Law and the Business Corporation Law. If all the conditions to the Merger set forth herein shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated in accordance herewith, the parties hereto shall within their power and authority cause to be properly executed and filed on the Closing Date Certificates of Merger for the Company meeting the applicable legal requirements. The Mergers shall become effective on the Closing Date or the filing of such documents, in accordance with applicable law, or at such later time as the parties hereto have agreed upon and designated in such merger filings. 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation until duly amended in accordance with their terms. 1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra immediately prior to the effective date of the Merger shall be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. The persons who are officers of Pentegra immediately prior to the effective date of the Merger shall be the officers of the Surviving Corporation and shall hold their respective offices until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal. 1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and without any action on the part of the holder thereof except for the specific perfomance of conditions of the Merger, all shares of the Signatory Shareholders of the Company's common stock issued and outstanding on the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired and shall cease to exist, and each holder of a certificate of representing shares of Company common stock shall thereafter cease to have any rights with respect to such shares except the right to receive the consideration set forth on ANNEX I attached hereto (the "Merger Consideration"). Each share of common stock of the Company held in treasury at the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired without payment of any consideration therefor. On the effective date of the Merger, each share of Pentegra Common Stock issued and outstanding shall, by virtue of the Mergers, and without any action on the part of the holder thereof except for the specific performance of conditions of the Merger, continue unchanged and remain outstanding as a share of validly issued, fully paid and nonassessable share of Surviving Corporation common stock. 1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger, the Signatory Shareholders, as the holders of a certificate or certificates representing shares of Company common stock shall, upon surrender of such certificate or certificates, or evidence of such certificates, receive the Merger Consideration, and until the certificate or certificates or certification of Company common stock shall have been surrendered by the Shareholder and replaced by a certificate or certificates representing Pentegra Common Stock (as set forth on ANNEX I), the certificate or certificates of Company common stock shall, for all purposes be deemed to evidence ownership of the number of shares of Pentegra Common Stock determined in accordance with the provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the Signatory Shareholders in the Merger shall be deemed for all purposes to have been issued by Pentegra on the Closing Date. The Signatory Shareholders shall deliver to Pentegra at Closing the certificate or certificates or certification representing the Company common stock owned by them, duly endorsed in blank by the Shareholders, or accompanied by duly executed blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at Pentegra's expense, affixed and cancelled. 1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Company and Shareholders shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable and within their power and authority to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Texas. Company has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Company does not own stock in or control, directly, any other corporation, association or business organization, nor is Company a party to any joint venture or partnership, except the stock accounts described on EXHIBIT 4.16. The Signatory Shareholders are the majority shareholders of the Company and the shareholders of the Company are set forth on EXHIBIT 2.1 and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens. Each share of Company's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Company are owned by Company in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Company on any matter, (b) securities of Company convertible into equity interests in Company, or (c) commitments, options, rights or warrants to issue any such equity interests in Company, to issue securities of Company convertible into such equity interests, or to redeem any securities of Company. No shares of capital stock of the Company have been issued or disposed of in violation of the preemptive rights or rights of first refusal of Company's shareholders. Company is not required to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Company does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action within its power and authority required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Company has obtained the approval of the shareholders of the Company owning the voting stock of the Company to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Company and Signatory Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Company and Signatory Shareholders, enforceable against Company and Signatory Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. To the best of Company and Signatory Shareholders knowledge the execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Company or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Company or any Shareholder is a party or by which Company or any Shareholder is bound, or violate any material restrictions of any kind to which Company is subject, or result in any lien or encumbrance on any of Company's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All material building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Company and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Company or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. [This section has intentionally been omitted.] 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Company and all amendments thereto have been delivered to Pentegra. The minute books of Company contain accurate minutes of meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Company since its formation. The books of account of Company have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Company have been properly recorded in such books. 2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Company as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Company. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Company or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Company, as lessor or lessee, or any condition or event of which any Shareholder or Company has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Company or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Company and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. Pentegra acknowledges that it has acquired the assets "where and as is" relying solely upon Pentegra's own examination. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Company, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Company has no right, title or interest in or to patents, patent rights, corporate names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Company, including the names of any entities from whom Company previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Company in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Company has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Company and the offices held by each, (b) the most recent payroll report of Company, showing all current employees of Company and their current levels of compensation, (c) promised increases in compensation of employees of Company that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Company is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Company is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Company has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Company, and Company has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Except as set forth on Exhibit 2.16, neither any Shareholder, Company nor the Business nor any of the Assets is subject to any pending, nor does Company or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Company, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Company and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Company or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Company has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Company ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Company or any Shareholder, or any condition or event of which Company or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Company and Shareholders have no knowledge of any default by any other party to such Contracts. Company and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Company or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Company on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company has not, since the Balance Sheet Date: (l) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement, other than in the course of business; (m) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (n) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (o) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (p) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (q) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Company since the Balance Sheet Date; (r) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (s) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (t) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (u) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (v) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (w) Redeemed, purchased, sold or issued any stock, bonds or other securities; (x) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (y) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Company; (z) Repurchased, approved any repurchase or agreed to repurchase any of Company's capital stock; or (aa) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Company has filed all tax returns (including tax reports and other statements) required to have been filed by it or have been properly extended, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate to the Company's best knowledge in all respects and properly reflect the relevant taxes for the periods covered thereby. Company has not received any notice that any tax deficiency or delinquency has been or may be asserted against Company. There are no audits relating to taxes of Company pending or in process or, to the knowledge of Company, threatened. Company is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Company. Company has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Company nor any predecessor of Company is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Company has delivered to Pentegra correct and complete copies of Company's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Company during the three calendar year period preceding the date of this Agreement. Company has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) No Shareholder presently intends to dispose of any of the shares of Pentegra Common Stock to be received hereunder nor is a party to any plan, arrangement or agreement for the disposition of such shares. Nothing contained herein shall prohibit Shareholders from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof, or other applicable law. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Company or Company's shareholders resulting from any action taken by Company or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any material liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Company or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Company (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed professional of Company carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Company have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Company, nor any Shareholder nor any licensed professional employee of Company has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Company has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company Plan," and collectively "Company Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. To the best of the Company and Signatory Shareholder's knowledge, no act or failure to act by Company has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Company Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Company Plans. Company has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Company Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Company, any Shareholder or any licensed professional employee of Company of any Federal, state or local law or regulation. Company and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Company that has not been properly and adequately converted. 2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed professional employee or independent contractor of Company has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Company, any Shareholder and each licensed professional employee of Company. Neither Company, nor any Shareholder, nor any licensed professional employee of Company has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Company, Shareholders and Company's licensed professional employees have not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Company or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Company has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Company (or their respective spouses, children or affiliates) owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Company or any organization that has a material contract or arrangement with Company, except as noted in Exhibit 2.15. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Company's services which accounted for more than 10% of revenues of Company in the preceding fiscal year. Company has good relations with all such payors and other material payors of Company and none of such payors has notified Company that it intends to discontinue its relationship with Company or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Company and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Pentegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the reorganization contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the reorganization contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Company or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Signatory Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Company and Signatory Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to both Company and Pentegra. 4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the Business and use the Assets in the ordinary course. Company and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Company and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Company and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Company. Company and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Company and Shareholder shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Company, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Company, the Business or the Assets as Pentegra or its representatives may request. Company and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Company is a party or relating to the Business or the Assets, and (b) any adverse change in Company's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Company and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Company and Shareholders shall not, and shall use its best efforts to cause Company's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Company or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Company and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Company and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Company or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Company to any employee or other person or entity (including, without limitation, any Company Plan and any liability under employment contracts with Company) allocable to services performed prior to the Closing Date. Company and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Company's employees or similar persons or entities, including, without limitation, any Company Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Company shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Company, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Company, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Company, nor will any repurchase of any of Company's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the reorganization contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Company (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Company and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Company required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 [INTENTIONALLY OMITTED] 4.12 LEASE. If Company leases any of its premises from any Shareholder or other affiliate of Company or any shareholder of Company, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dentist employees of Company employed by the Company as of the Closing Date, with such employment to be effective as of the Closing Date. Notwithstanding the above, Company and Shareholders shall remain liable under any Company Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Company's employees incurred by Company prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Company and shall be treated as Clinic employees for purposes of eligibility and participation in Company Plans. 4.15 INSURANCE. Company shall agree to have and shall assist Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. The Signatory Shareholders shall have authorized to be formed a limited liability company, partnership or other legal entity (the "Practice"), which shall be incorporated, controlled and have as its sole initial member/shareholder/partner - Walter J. Anderson, D.D.S., for the purpose of practicing dentistry and other services ancillary thereto, entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the practice of dentistry is conducted by the Shareholders and the Practice. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. Walter J. Anderson, D.D.S. shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Company shall have transferred the Excluded Assets set forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for equity interest in the Practice, and the Company shall have distributed such equity interest in the Practice to Walter J. Anderson, D.D.S. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement to be executed and delivered on the Closing Date, and has taken or will take all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such mutually agreeable documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice on the Closing Date and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and have filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra and Company agree to complete the Exhibits hereto to be provided by both parties. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS. Pentegra, Shareholders and Company agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Company and Shareholders shall furnish all information concerning Company and Signatory Shareholders as may be reasonable requested in connection with any such action. Company and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Company and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Company and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Company and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Company and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Company, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a mutually agreeable Service Agreement (the "Service Agreement"), which may be in the form attached hereto as EXHIBIT 7.7, and otherwise satisfactory to Company and Pentegra, pursuant to which Pentegra will provide management services to the Practice. Each member/shareholder/partner of the Practice shall have executed and delivered a mutually agreeable Guaranty Agreement which may be in the form attached as EXHIBIT 4.10, and otherwise satisfactory to Company and Pentegra of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, or assigned to the Practice, each employment agreement between the Company and each shareholder of Company, and Walter Anderson, D.D.S. and any shareholder for which the employment agreement between the Company and such shareholder is terminated rather than assigned to the Practice, shall have executed a mutually agreeable employment agreement ("Employment Agreement") with the Practice which may be in the form attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Company and Pentegra. 7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Company and its shareholders or affiliates and Company shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Company since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Company and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Company shall have received all documents, duly executed in form satisfactory to Company and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF COMPANY AND SIGNATORY SHAREHOLDERS. On or before the Closing Date, Company and Signatory Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Company authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) executed merger certificate and/or plan as required by applicable state law; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra and the original stock certificates together with blank stock powers representing the outstanding shares of Company common stock; (f) certificates or evidence of certification of the Signatory Shareholders and a duly authorized officer of Company dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Company and Signatory Shareholder contained herein; (ii) as to the performance of and compliance by Company and Signatory Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Company and Signatory Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Company certifying as to the incumbency of the directors and officers of Company and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Company; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Company and any state of required foreign qualification of Company establishing that Company is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Company and Signatory Shareholders opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Company, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Company; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Company and Signatory Shareholders, the following, all of which shall be in a form satisfactory to counsel to Company and Signatory Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Merger Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, note, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Company; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Company; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Company to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Company and Signatory Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD COMPANY AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. (D) ANY LIABILITY OF PENTEGRA FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEY'S FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY COMPANY AND SIGNATORY SHAREHOLDERS. SIGNATORY SHAREHOLDERS AND, PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Company or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Company or any Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Company or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Company or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Company or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Company if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Company, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received as consideration by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, received by any party hereunder as consideration, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, received by any party hereunder as consideration, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Company pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Signatory Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Company pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Each Signatory Shareholder covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Company resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Each signatory shareholder is able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Signatory Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Signatory Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Signatory Shareholders are "accredited investor" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and Signatory Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is a valuable, special and unique asset of Pentegra's businesses. Company and Signatory Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Company or Signatory Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Company and Signatory Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Company and Signatory Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit or any legal action against the disclosing party, or (iv) Company and Signatory Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Company or Signatory Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Company and Signatory Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. Pentegra recognizes and acknowledges that it had in the past, currently has, and in the future may possibly have, access to certain confidential information of Company that is a valuable, special and unique asset of Company. Pentegra agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Pentegra, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Pentegra shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Pentegra reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Pentegra is the sole and exclusive owner of such confidential information as a result of the transaction contemplated hereunder or otherwise. In the event of a breach or threatened breach by Pentegra of the provision of this SECTION 13, Company shall be entitled to an injunction restraining Pentegra from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement will qualify as a reorganization within the meaning of Section 368(a) of the Code. The tax returns (and schedules thereto) of Shareholders, Company and Pentegra shall be filed in a manner consistent with such intention and Shareholders and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Company and Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Company or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Company. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF TEXAS AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS AND THE ESCROW LETTER ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Company, be relieved from its obligations to Company under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Company, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Company and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Company or may demand from Company, and Company agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Company or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoenix, Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. Walter J. Anderson, D.D.S., Donald H. Plotkin, D.D.S., William H. Swilley, D.D.S., William A. Cerny, D.D.S. and Graham K. Satchell, D.D.S., Inc., dba Anderson Dental Group By: /s/ Walter Anderson, D.D.S. --------------------------------- Walter Anderson, D.D.S. President PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman -------------------------------- Its: Senior Vice President -------------------------------- /s/ Afshan Kaviani, D.D.S. - --------------------------------- Afshan Kaviani, D.D.S. /s/ Donald H. Plotkin, D.D.S. - --------------------------------- DONALD H. PLOTKIN, D.D.S. /s/ Brian M. Ellis, D.D.S. - --------------------------------- BRIAN M. ELLIS, D.D.S. /s/ Walter J. Anderson, D.D.S. - --------------------------------- WALTER J. ANDERSON, D.D.S. /s/ William A. Cerny, D.D.S. - --------------------------------- WILLIAM A. CERNY, D.D.S. INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Merger Consideration A Target Companies 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 4.16 Excluded Assets and Excluded Liabilities 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.9 5 EXHIBIT 2.9 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., RONNIE ANDRESS, D.D.S., INC. and RONNIE ANDRESS, D.D.S. TABLE OF CONTENTS Page ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. . . . . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS . . . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. . . . . . . . . . . 3 2.4 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES. . . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . 3 2.8 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. . . . . . . . . . . . . . . . . 4 2.11 INVENTORIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. . . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES . . . . . . . . 4 2.14 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL. . . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS . . . . . . . . 8 2.28 PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING . . . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS. . . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. . . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.6 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. . . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. . . . . . . . . . 10 4.5 ACQUISITION PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . . 10 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES. . . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT ACQUISITION . . . . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE . . . . . . . . . . . . . . . . . . 11 4.12 LEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.13 HIRING OF EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. . . . . . . . . . . . . . . . . . 12 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. . . . . . . . . . 12 Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 13 7.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 13 7.3 PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.4 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . 13 7.5 DUE DILIGENCE REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.6 APPROVAL BY THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . 13 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. . . . . . . . . . . . . . . . . 13 7.8 EMPLOYMENT ARRANGEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.12 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.13 NO CHANGE IN WORKING CAPITAL . . . . . . . . . . . . . . . . . . . . . 13 7.14 SECURITIES APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 14 8.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 14 8.3 PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.4 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.5 SECURITIES APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . 16 10.2 INDEMNIFICATION BY PENTEGRA. . . . . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . . 17 10.4 INDEMNIFICATION PROCEDURE. . . . . . . . . . . . . . . . . . . . . . . 18 10.5 RIGHT OF SETOFF. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 19 12.2 INVESTMENTS; COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION. . . . . . . . . . . . . . . . . . . . . 20 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . 21 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . 21 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . 21 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . 22 14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 15, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), Ronnie Andress, D.D.S., Inc. ("Contributor") and Ronnie Andress, D.D.S., shareholders of Contributor (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Contributor operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra desires to receive from Contributor, certain assets of Contributor; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Contributor, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Contributor shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Contributor's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Contributor shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Contributor contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Contributor the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Contributor listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Contributor, including, but not limited to, liabilities arising under any Contributor Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by any Shareholder or Contributor, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Contributor reflected on the books of Contributor at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Contributor, any licensed professional employee or independent contractor of Contributor or any Shareholder, (vi) any liability for the payment of any taxes of Contributor or any Shareholder, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Contributor or any Shareholder. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, Contributor and Shareholders shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS. Contributor and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Contributor is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Texas. Contributor has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Contributor does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Contributor a party to any joint venture or partnership. The Shareholders are the sole shareholders of Contributor and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Contributor's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Contributor are owned by Contributor in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Contributor on any matter, (b) securities of Contributor convertible into equity interests in Contributor, or (c) commitments, options, rights or warrants to issue any such equity interests in Contributor, to issue securities of Contributor convertible into such equity interests, or to redeem any securities of Contributor. No shares of capital stock of Contributor have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Contributor's stockholders. Contributor is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Contributor does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Contributor has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Contributor and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Contributor and Shareholders, enforceable against Contributor and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Contributor or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Contributor or any Shareholder is a party or by which Contributor or any Shareholder is bound, or violate any material restrictions of any kind to which Contributor is subject, or result in any lien or encumbrance on any of Contributor's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Contributor and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Contributor or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Contributor on any of its capital stock since the Balance Sheet Date. No repurchase of any of Contributor's capital stock has been approved, effected or is pending, or is contemplated by Contributor. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Contributor and all amendments thereto have been delivered to Pentegra. The minute books of Contributor contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Contributor since its formation. The books of account of Contributor have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Contributor have been properly recorded in such books. 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Contributor as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Contributor. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Contributor or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Contributor, as lessor or lessee, or any condition or event of which any Shareholder or Contributor has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Contributor or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Contributor and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Contributor, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Contributor has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Contributor, including the names of any entities from whom Contributor previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Contributor is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Contributor in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Contributor has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Contributor and the offices held by each, (b) the most recent payroll report of Contributor, showing all current employees of Contributor and their current levels of compensation, (c) promised increases in compensation of employees of Contributor that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Contributor is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Contributor is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Contributor has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Contributor, and Contributor has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Contributor nor the Business nor any of the Assets is subject to any pending, nor does Contributor or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Contributor, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Contributor and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Contributor or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Contributor ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Contributor or any Shareholder, or any condition or event of which Contributor or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Contributor and Shareholders have no knowledge of any default by any other party to such Contracts. Contributor and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Contributor are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Contributor or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Contributor on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Contributor has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Contributor since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Contributor; (o) Repurchased, approved any repurchase or agreed to repurchase any of Contributor's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Contributor has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Contributor has not received any notice that any tax deficiency or delinquency has been or may be asserted against Contributor. There are no audits relating to taxes of Contributor pending or in process or, to the knowledge of Contributor, threatened. Contributor is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Contributor. Contributor has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Contributor nor any predecessor of Contributor is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Contributor has delivered to Pentegra correct and complete copies of Contributor's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Contributor during the three calendar year period preceding the date of this Agreement. Contributor has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Contributor does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Contributor and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Contributor from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Contributor or Contributor's shareholders resulting from any action taken by Contributor or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Contributor did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Contributor and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Contributor or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Contributor (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Contributor, each Shareholder and each licensed professional of Contributor carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Contributor have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Contributor, nor any Shareholder nor any licensed professional employee of Contributor has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Contributor has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Contributor Plan," and collectively "Contributor Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Contributor has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Contributor Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Contributor Plans. Contributor has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Contributor Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Shareholders and Contributor's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Contributor, any Shareholder or any licensed professional employee of Contributor of any Federal, state or local law or regulation. Contributor and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Contributor. 2.24 THIRD PARTY PAYORS. Contributor, Shareholders and each licensed professional employee or independent contractor of Contributor has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Contributor, any Shareholder and each licensed professional employee of Contributor. Neither Contributor, nor any Shareholder, nor any licensed professional employee of Contributor has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Contributor, Shareholders and Contributor's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Contributor or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Contributor or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Contributor has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Contributor, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Contributor or any organization that has a material contract or arrangement with Contributor. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Contributor's services which accounted for more than 10% of revenues of Contributor in the preceding fiscal year. Contributor has good relations with all such payors and other material payors of Contributor and none of such payors has notified Contributor that it intends to discontinue its relationship with Contributor or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Contributor and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Pentegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Contributor or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS. Contributor and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Contributor and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Contributor and Shareholders shall operate the Business and use the Assets in the ordinary course. Contributor and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Contributor and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Contributor and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Contributor. Contributor and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Contributor and Shareholders shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Contributor and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Contributor, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Contributor, the Business or the Assets as Pentegra or its representatives may request. Contributor and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Contributor is a party or relating to the Business or the Assets, and (b) any adverse change in Contributor's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Contributor and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of Contributor contemplated by the Service Agreement and to conduct the intended business of Contributor and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Contributor and Shareholders shall not, and shall use its best efforts to cause Contributor's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Contributor or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Contributor and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Contributor and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Contributor or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Contributor to any employee or other person or entity (including, without limitation, any Contributor Plan and any liability under employment contracts with Contributor) allocable to services performed prior to the Closing Date. Contributor and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Contributor's employees or similar persons or entities, including, without limitation, any Contributor Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Contributor, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Contributor, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Contributor, nor will any repurchase of any of Contributor's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Contributor and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Contributor (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Contributor and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Contributor required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Contributor hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Contributor and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Contributor prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Contributor and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Contributor and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Contributor and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Contributor leases any of its premises from any Shareholder or other affiliate of Contributor or any shareholder of Contributor, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Contributor and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Contributor designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Contributor and Shareholders shall remain liable under any Contributor Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Contributor's employees incurred by Contributor prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that all employees of Contributor hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Contributor and shall be treated as Clinic employees for purposes of eligibility and participation in Contributor Plans. 4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS. Pentegra, Shareholders and Contributor agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Contributor and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Contributor and Shareholders shall furnish all information concerning Contributor and Shareholders as may be reasonable requested in connection with any such action. Contributor and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Contributor and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Contributor and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Contributor and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Contributor and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Contributor and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Contributor, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Contributor. Each Shareholder shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of Contributor under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and caused each shareholder of Contributor that has an existing employment agreement with Contributor to have terminated his or her employment agreement with Contributor and shall have executed an employment agreement ("Employment Agreement") with Contributor in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Contributor and Pentegra. 7.9 CONSENTS AND APPROVALS. Contributor and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Contributor and its shareholders or affiliates and Contributor shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Contributor and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Contributor since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Contributor and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Contributor shall have received all documents, duly executed in form satisfactory to Contributor and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. Within five business days after requested by Pentegra, Contributor and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Contributor authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) a bill of sale conveying the Assets to Pentegra; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (f) certificates of the Shareholders and a duly authorized officer of Contributor dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Contributor and Shareholder contained herein; (ii) as to the performance of and compliance by Contributor and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Contributor and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Contributor certifying as to the incumbency of the directors and officers of Contributor and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Contributor; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Contributor and any state of required foreign qualification of Contributor establishing that Contributor is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Contributor and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Contributor, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Contributor; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Contributor, in substantially the form attached hereto as EXHIBIT 9.1(L) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Contributor and Shareholder, the following, all of which shall be in a form satisfactory to counsel to Contributor and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Contributor; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Contributor; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Contributor to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Contributor and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD CONTRIBUTOR AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING CONTRIBUTOR AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. CONTRIBUTOR AND SHAREHOLDERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY CONTRIBUTOR OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE CONTRIBUTOR OR SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF CONTRIBUTOR OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF CONTRIBUTOR OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(B), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE CONTRIBUTOR OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Contributor or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Contributor or Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Contributor or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Contributor or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Contributor or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Contributor if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Contributor, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Contributor shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Contributor pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Contributor pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Contributor pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Contributor covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Contributor resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Contributor, Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Contributor, Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Contributor and Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Contributor and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Contributor or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Contributor and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Contributor and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Contributor and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Contributor or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Contributor and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Shareholders, Contributor and Pentegra shall be filed in a manner consistent with such intention and Contributor and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Contributor or Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Contributor or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Contributor. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF CONTRIBUTOR AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Contributor, be relieved from its obligations to Contributor under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Contributor, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Contributor and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Contributor or may demand from Contributor, and Contributor agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Contributors or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoenix, Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. Ronnie Andress, D.D.S., Inc. By: /s/ Ronnie Andress, D.D.S. ---------------------------------- Its: President ---------------------------------- PENTEGRA DENTAL GROUP, INC. By: /s/ James L. Dunn, Jr. ---------------------------------- Its: Senior Vice-President ---------------------------------- /s/ Ronnie Andress, D.D.S. -------------------------------------- Ronnie Andress, D.D.S., Shareholder INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.10 6 EXHIBIT 2.10 AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG PENTEGRA DENTAL GROUP, INC., VICTOR H. BURDICK, D.D.S., P.C.., and VICTOR H. BURDICK, D.D.S. TABLE OF CONTENTS PAGE ---- Section 1. TERMS OF THE REORGANIZATION 1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . 2 1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . 4 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . 5 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . 6 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . 9 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . 11 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.17 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 12 4.18 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 12 4.19 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 12 4.20 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 12 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . 12 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . 12 Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . 13 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . 13 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . 13 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . 13 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . 13 7.7 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 13 7.8 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . 14 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . 14 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . 14 Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . 14 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . 14 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . 14 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . 16 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . 17 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . 18 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . 19 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . 20 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . 20 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . 21 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . 21 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . 21 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . 22 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . 22 14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . 22 14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . 22 14.12 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . 22 14.13 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.14 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . 22 14.15 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . 23 AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), VICTOR H. BURDICK, D.D.S., P.C., a Colorado professional corporation ("Company") and VICTOR H. BURDICK, D.D.S., the sole shareholder of the Company (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Company operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, the Boards of Directors of the Company and Pentegra have determined that a reorganization between each of them is in the best interests of their respective companies; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Company, the "Target Companies") and simultaneously with the closing of the reorganization contemplated herein, intends to consummate its initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock"); WHEREAS, it is intended for Federal income tax purposes that the reorganization contemplated by this Agreement shall qualify as an reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. . NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE REORGANIZATION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 MERGER. Subject to and upon the terms and conditions contained herein, on the Closing Date, the Company shall be merged with and into Pentegra (or its permitted designated affiliate, in which case, the references herein to Pentegra shall be to such designated affiliate and its shares of common stock) in accordance with this Agreement and the separate corporate existence of the Company shall thereupon cease ("Merger"). Pentegra shall be the surviving corporation in the Merger ("Surviving Corporation") and shall continue to be governed by the laws of the State of Delaware and the separate corporate existence of Pentegra with all rights, privileges, powers, immunities and purposes shall continue unaffected by the Merger. The Merger shall have the effects specified in the Delaware General Corporation Law and the Colorado Business Corporation Law. If all the conditions to the Merger set forth herein shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated in accordance herewith, the parties hereto shall cause to be properly executed and filed on the Closing Date Certificates of Merger for the Company meeting the applicable legal requirements. The Mergers shall become effective on the Closing Date or the filing of such documents, in accordance with applicable law, or at such later time as the parties hereto have agreed upon and designated in such merger filings. 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation until duly amended in accordance with their terms. 1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra immediately prior to the effective date of the Merger shall be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. The persons who are officers of Pentegra immediately prior to the effective date of the Merger shall be the officers of the Surviving Corporation and shall hold their respective offices until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal. 1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and without any action on the part of the holder thereof, all shares of the Company's common stock issued and outstanding on the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired and shall cease to exist, and each holder of a certificate of representing shares of Company common stock shall thereafter cease to have any rights with respect to such shares except the right to receive the consideration set forth on ANNEX I attached hereto (the "Merger Consideration"). Each share of common stock of the Company held in treasury at the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired without payment of any consideration therefor. On the effective date of the Merger, each share of Pentegra Common Stock issued and outstanding shall, by virtue of he Mergers, and without any action on the part of the holder thereof, continue unchanged and remain outstanding as a share of validly issued, fully paid and nonassessable share of Surviving Corporation common stock. 1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger, the Shareholders, as the holders of a certificate or certificates representing shares of Company common stock shall, upon surrender of such certificate or certificates, receive the Merger Consideration, and until the certificate or certificates of Company common stock shall have been surrendered by the Shareholder and replaced by a certificate or certificates representing Pentegra Common Stock (as set forth on ANNEX I), the certificate or certificates of Company common stock shall, for all purposes be deemed to evidence ownership of the number of shares of Pentegra Common Stock determined in accordance with the provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the Shareholders in the Merger shall be deemed for all purposes to have been issued by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at Closing the certificate or certificates representing the Company common stock owned by them, duly endorsed in blank by the Shareholders, or accompanied by duly executed blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the Shareholder's expense, affixed and cancelled. 1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets (defined as those assets to be owned by the Company on the date of Closing, excluding those assets described in Exhibit 4.16), or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Company and Shareholders shall excecute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Colorado. Company has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Company does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Company a party to any joint venture or partnership. The Shareholders are the sole shareholders of Company and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Company are owned by Company in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Company on any matter, (b) securities of Company convertible into equity interests in Company, or (c) commitments, options, rights or warrants to issue any such equity interests in Company, to issue securities of Company convertible into such equity interests, or to redeem any securities of Company. No shares of capital stock of Company have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Company's stockholders. Company is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Company does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Company has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Company and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Company and Shareholders, enforceable against Company and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Company or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Company or any Shareholder is a party or by which Company or any Shareholder is bound, or violate any material restrictions of any kind to which Company is subject, or result in any lien or encumbrance on any of Company's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Company and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Company or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Company on any of its capital stock since the Balance Sheet Date. No repurchase of any of Company's capital stock has been approved, effected or is pending, or is contemplated by Company. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Company and all amendments thereto have been delivered to Pentegra. The minute books of Company contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Company since its formation. The books of account of Company have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Company have been properly recorded in such books. 2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior one full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Company as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Company. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Company or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Company, as lessor or lessee, or any condition or event of which any Shareholder or Company has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Company or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Company and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Company, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Company has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Company, including the names of any entities from whom Company previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Company in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Company has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Company and the offices held by each, (b) the most recent payroll report of Company, showing all current employees of Company and their current levels of compensation, (c) promised increases in compensation of employees of Company that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Company is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Company is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Company has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Company, and Company has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the Business nor any of the Assets is subject to any pending, nor does Company or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Company, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Company and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Company or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Company has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Company ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Company or any Shareholder, or any condition or event of which Company or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Company and Shareholders have no knowledge of any default by any other party to such Contracts. Company and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Company or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Company on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement or except in the ordinary course of business; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Company since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Company; (o) Repurchased, approved any repurchase or agreed to repurchase any of Company's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Company has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Company has not received any notice that any tax deficiency or delinquency has been or may be asserted against Company. There are no audits relating to taxes of Company pending or in process or, to the knowledge of Company, threatened. Company is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Company. Company has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Company nor any predecessor of Company is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Company has delivered to Pentegra correct and complete copies of Company's one most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Company during the three calendar year period preceding the date of this Agreement. Company has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) No Shareholder presently intends to dispose of any of the shares of Pentegra Common Stock to be received hereunder nor is a party to any plan, arrangement or agreement for the disposition of such shares. Company and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Shareholders from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Company or Company's shareholders resulting from any action taken by Company or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Company or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Company (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed professional of Company carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Company have received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Company, nor any Shareholder nor any licensed professional employee of Company has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Company has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company Plan," and collectively "Company Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Company has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Company Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Company Plans. Company has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Company Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Company, any Shareholder or any licensed professional employee of Company of any Federal, state or local law or regulation. Company and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Company. 2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed professional employee or independent contractor of Company has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Company, any Shareholder and each licensed professional employee of Company. Neither Company, nor any Shareholder, nor any licensed professional employee of Company has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Company, Shareholders and Company's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Company or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Company has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Company, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Company or any organization that has a material contract or arrangement with Company. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Company's services which accounted for more than 10% of revenues of Company in the preceding fiscal year. Company has good relations with all such payors and other material payors of Company and none of such payors has notified Company that it intends to discontinue its relationship with Company or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Company and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the reorganization contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the reorganization contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, the Private Placement Memorandum to be delivered by Pentegra, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Company or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Company and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the Business and use the Assets in the ordinary course. Company and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Company and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Company and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Company. Company and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Company and Shareholdes shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and its authorized representatives upon reasonable advance notice, access to, and make available for inspection, all of the assets and business of Company, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Company, the Business or the Assets as Pentegra or its representatives may request. Company and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Company is a party or relating to the Business or the Assets, and (b) any adverse change in Company's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Company and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Company and Shareholders shall not, and shall use its best efforts to cause Company's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Company or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Company and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Company and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Company or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Company to any employee or other person or entity (including, without limitation, any Company Plan and any liability under employment contracts with Company) allocable to services performed prior to the Closing Date. Company and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Company's employees or similar persons or entities, including, without limitation, any Company Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Company shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Company, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Company, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Company, nor will any repurchase of any of Company's capital stock be approved or effected, except distribution of those assets described in Exhibit 4.16. 4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the reorganization contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Company (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Company and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Company required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Company hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Company and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Company prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement or as described in Exhibit 4.16. If required by Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Company and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Company and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Company leases any of its premises from any Shareholder or other affiliate of Company or any shareholder of Company, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dentist employees of Company designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Company and Shareholders shall remain liable under any Company Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Company's employees incurred by Company prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Company and shall be treated as Clinic employees for purposes of eligibility and participation in Company Plans. 4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 [INTENTIONALLY DELETED] 4.17 [INTENTIONALLY DELETED] 4.18 [INTENTIONALLY DELETED] 4.19 [INTENTIONALLY DELETED] 4.20 [INTENTIONALLY DELETED] SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS. Pentegra, Shareholders and Company agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement") and Pentegra shall use its best efforts to obtain an effective date for the Registration Statement. Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Company and Shareholders shall furnish all information concerning Company and Shareholders as may be reasonable requested in connection with any such action. Company and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Company and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Company and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Company and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Company and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Company, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 [INTENTIONALLY DELETED] 7.8 [INTENTIONALLY DELETED] 7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Company and its shareholders or affiliates and Company shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Company since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Company and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.3.1 NO ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operation, assets, liabilities, business or prospects of Pentegra shall have occurred since the date of the Private Placement Memorandum, including the pro forma financial information. 8.4 CLOSING DELIVERIES. Company shall have received all documents, duly executed in form satisfactory to Company and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC and closing shall have occurred with the underwriter in the IPO. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days after requested by Pentegra, Company and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) [intentionally deleted]; (b) [intentionally deleted]; (c) a copy of the resolutions of the Board of Directors of Company authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) executed merger certificate and/or plan as required by applicable state law; (e) [intentionally deleted]; (f) certificates of the Shareholders and a duly authorized officer of Company dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Company and Shareholder contained herein; (ii) as to the performance of and compliance by Company and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Company and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Company certifying as to the incumbency of the directors and officers of Company and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Company; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Company and any state of required foreign qualification of Company establishing that Company is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Company and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Company, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Company; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement and any other instruments and agreements reasonably requested by Pentegra in connection with any service arrangements to be provided by Pentegra to Shareholder. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Company and Shareholders, the following, all of which shall be in a form satisfactory to counsel to Company and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Merger Consideration; (b) [intentionally deleted]; (c) [intentionally deleted]; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Company; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Company; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Company to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Company and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Company or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra hereunder or under any other agreements executed between Pentegra and Shareholder. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Company or any Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Company or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Company or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Company or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Company if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Company, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Company pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Company pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Each Shareholder covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Company resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Company and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Company or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Company and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Company and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Company and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Company and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement will qualify as a reorganization within the meaning of Section 368(a) of the Code. The tax returns (and schedules thereto) of Shareholders, Company and Pentegra shall be filed in a manner consistent with such intention and Shareholders and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Company and Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Company or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Company. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Company, be relieved from its obligations to Company under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Company, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Company and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Company or may demand from Company, and Company agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Companys or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. VICTOR H. BURDICK, D.D.S., P.C. By: /s/ Victor H. Burdick, D.D.S. ------------------------------- Its: President ------------------------------- PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman ------------------------------- Its: Senior Vice President ------------------------------- /s/ VICTOR H. BURDICK ------------------------------------ Victor H. Burdick, D.D.S. INDEX TO EXHIBITS EXHIBIT DESCRIPTION ------- ----------- Annex I Merger Consideration A Target Companies 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 4.16 Excluded Assets and Excluded Liabilities 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.11 7 EXHIBIT 2.11 AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG PENTEGRA DENTAL GROUP, INC., MARVIN V. CAVALLINO, D.D.S., A PROFESSIONAL CORPORATION and MARVIN CAVALLINO, D.D.S. TABLE OF CONTENTS PAGE ---- Section 1. TERMS OF THE REORGANIZATION 1.2 MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 1.3 CERTIFICATE OF INCORPORATION; BYLAWS . . . . . . . . . . . . . . . .2 1.7 SUBSEQUENT ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . .2 Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING . . . . . . . . . . . . . . . . .2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS . . . . . . . . . . . . . . . .3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . .3 2.4 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . .3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . .3 2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . .4 2.8 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . .4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . .4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . .4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . .4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . .5 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . .6 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . .7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . .7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . .7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . .8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . .8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . .8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . .8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . .8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . .9 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . .9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . .9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . .9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . .9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . 11 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . 12 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . 13 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . 13 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 13 Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . 13 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 14 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . 14 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . 14 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . 14 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . 14 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . 14 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . 14 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . 14 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . 14 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . 14 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . 15 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 15 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . 15 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . 15 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . 15 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . 16 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . 17 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . 17 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . 18 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . 19 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 20 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . 20 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . 21 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . 22 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . 22 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . 22 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . 22 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . 22 14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . 23 14.12 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . 23 14.13 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.14 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . 23 14.15 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.16 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and executed effective August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), MARVIN V. CAVALLINO, D.D.S., A PROFESSIONAL CORPORATION, a Louisiana professional corporation ("Company") and MARVIN CAVALLINO, D.D.S., shareholder of Company (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Company operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, the Boards of Directors of the Company and Pentegra have determined that a reorganization between each of them is in the best interests of their respective companies; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Company, the "Target Companies") and simultaneously with the closing of the reorganization contemplated herein, intends to consummate its initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock"); WHEREAS, it is intended for Federal income tax purposes that the reorganization contemplated by this Agreement shall qualify as an reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE REORGANIZATION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 MERGER. Subject to and upon the terms and conditions contained herein, on the Closing Date, the Company shall be merged with and into Pentegra (or its designated affiliate, in which case, the references herein to Pentegra shall be to such designated affiliate and its shares of common stock) in accordance with this Agreement and the separate corporate existence of the Company shall thereupon cease ("Merger"). Pentegra shall be the surviving corporation in the Merger ("Surviving Corporation") and shall continue to be governed by the laws of the State of Delaware and the separate corporate existence of Pentegra with all rights, privileges, powers, immunities and purposes shall continue unaffected by the Merger. The Merger shall have the effects specified in the Delaware General Corporation Law and the Louisiana Business Corporation Law. If all the conditions to the Merger set forth herein shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated in accordance herewith, the parties hereto shall cause to be properly executed and filed on the Closing Date Certificates of Merger for the Company meeting the applicable legal requirements. The Mergers shall become effective on the Closing Date or the filing of such documents, in accordance with applicable law, or at such later time as the parties hereto have agreed upon and designated in such merger filings. 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation until duly amended in accordance with their terms. 1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra immediately prior to the effective date of the Merger shall be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. The persons who are officers of Pentegra immediately prior to the effective date of the Merger shall be the officers of the Surviving Corporation and shall hold their respective offices until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal. 1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and without any action on the part of the holder thereof, all shares of the Company's common stock issued and outstanding on the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired and shall cease to exist, and each holder of a certificate of representing shares of Company common stock shall thereafter cease to have any rights with respect to such shares except the right to receive the consideration set forth on ANNEX I attached hereto (the "Merger Consideration"). Each share of common stock of the Company held in treasury at the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired without payment of any consideration therefor. On the effective date of the Merger, each share of Pentegra Common Stock issued and outstanding shall, by virtue of he Mergers, and without any action on the part of the holder thereof, continue unchanged and remain outstanding as a share of validly issued, fully paid and nonassessable share of Surviving Corporation common stock. 1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger, the Shareholders, as the holders of a certificate or certificates representing shares of Company common stock shall, upon surrender of such certificate or certificates, receive the Merger Consideration, and until the certificate or certificates of Company common stock shall have been surrendered by the Shareholder and replaced by a certificate or certificates representing Pentegra Common Stock (as set forth on ANNEX I), the certificate or certificates of Company common stock shall, for all purposes be deemed to evidence ownership of the number of shares of Pentegra Common Stock determined in accordance with the provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the Shareholders in the Merger shall be deemed for all purposes to have been issued by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at Closing the certificate or certificates representing the Company common stock owned by them, duly endorsed in blank by the Shareholders, or accompanied by duly executed blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the Shareholder's expense, affixed and cancelled. 1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Company and Shareholders shall excecute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Louisiana. Company has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Company does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Company a party to any joint venture or partnership. The Shareholders are the sole shareholders of Company and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Company are owned by Company in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Company on any matter, (b) securities of Company convertible into equity interests in Company, or (c) commitments, options, rights or warrants to issue any such equity interests in Company, to issue securities of Company convertible into such equity interests, or to redeem any securities of Company. No shares of capital stock of Company have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Company's stockholders. Company is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Company does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Company has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Company and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Company and Shareholders, enforceable against Company and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Company or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Company or any Shareholder is a party or by which Company or any Shareholder is bound, or violate any material restrictions of any kind to which Company is subject, or result in any lien or encumbrance on any of Company's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Company and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Company or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Company on any of its capital stock since the Balance Sheet Date. No repurchase of any of Company's capital stock has been approved, effected or is pending, or is contemplated by Company. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Company and all amendments thereto have been delivered to Pentegra. The minute books of Company contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Company since its formation. The books of account of Company have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Company have been properly recorded in such books. 2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Company as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Company. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Company or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Company, as lessor or lessee, or any condition or event of which any Shareholder or Company has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Company or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Company and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Company, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Company has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Company, including the names of any entities from whom Company previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Company in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Company has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Company and the offices held by each, (b) the most recent payroll report of Company, showing all current employees of Company and their current levels of compensation, (c) promised increases in compensation of employees of Company that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Company is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Company is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Company has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Company, and Company has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the Business nor any of the Assets is subject to any pending, nor does Company or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Company, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Company and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Company or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Company has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Company ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Company or any Shareholder, or any condition or event of which Company or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Company and Shareholders have no knowledge of any default by any other party to such Contracts. Company and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Company or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Company on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Company since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Company; (o) Repurchased, approved any repurchase or agreed to repurchase any of Company's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Company has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Company has not received any notice that any tax deficiency or delinquency has been or may be asserted against Company. There are no audits relating to taxes of Company pending or in process or, to the knowledge of Company, threatened. Company is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Company. Company has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Company nor any predecessor of Company is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Company has delivered to Pentegra correct and complete copies of Company's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Company during the three calendar year period preceding the date of this Agreement. Company has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) No Shareholder presently intends to dispose of any of the shares of Pentegra Common Stock to be received hereunder nor is a party to any plan, arrangement or agreement for the disposition of such shares. Company and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Shareholders from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Company or Company's shareholders resulting from any action taken by Company or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Company or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Company (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed professional of Company carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Company have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Company, nor any Shareholder nor any licensed professional employee of Company has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Company has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company Plan," and collectively "Company Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Company has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Company Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Company Plans. Company has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Company Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Company, any Shareholder or any licensed professional employee of Company of any Federal, state or local law or regulation. Company and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Company. 2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed professional employee or independent contractor of Company has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Company, any Shareholder and each licensed professional employee of Company. Neither Company, nor any Shareholder, nor any licensed professional employee of Company has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Company, Shareholders and Company's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Company or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Company has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Company, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Company or any organization that has a material contract or arrangement with Company. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Company's services which accounted for more than 10% of revenues of Company in the preceding fiscal year. Company has good relations with all such payors and other material payors of Company and none of such payors has notified Company that it intends to discontinue its relationship with Company or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Company and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the reorganization contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the reorganization contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Company or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Company and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. Company and Shareholders shall amend the Articles of Incorporation to provide that the Company shall become a general business corporation. 4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the Business and use the Assets in the ordinary course. Company and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Company and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Company and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Company. Company and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Company and Shareholdes shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Company, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Company, the Business or the Assets as Pentegra or its representatives may request. Company and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Company is a party or relating to the Business or the Assets, and (b) any adverse change in Company's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Company and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Company and Shareholders shall not, and shall use its best efforts to cause Company's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Company or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Company and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Company and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Company or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Company to any employee or other person or entity (including, without limitation, any Company Plan and any liability under employment contracts with Company) allocable to services performed prior to the Closing Date. Company and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Company's employees or similar persons or entities, including, without limitation, any Company Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Company shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Company, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Company, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Company, nor will any repurchase of any of Company's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the reorganization contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Company (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Company and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Company required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Company hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Company and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Company prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Company and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Company and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Company leases any of its premises from any Shareholder or other affiliate of Company or any shareholder of Company, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, the terms set forth on EXHIBIT 2.8 attached hereto and made a part hereof. 4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dentist employees of Company designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Company and Shareholders shall remain liable under any Company Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Company's employees incurred by Company prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Company and shall be treated as Clinic employees for purposes of eligibility and participation in Company Plans. 4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the practice of dentistry is conducted by the Shareholders and the Practice. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Shareholders shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. The Company shall have transferred the Excluded Assets set forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for equity interest in the Practice, and the Company shall have distributed such equity interests in the Practice to the Shareholders. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and have filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS. Pentegra, Shareholders and Company agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Company and Shareholders shall furnish all information concerning Company and Shareholders as may be reasonable requested in connection with any such action. Company and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Company and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Company and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Company and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Company and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Company, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; DENTIST AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Each Shareholder shall have executed and delivered a Dentist Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused each shareholder of Company that has an existing employment agreement with Company to have terminated his or her employment agreement with Company and shall have executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Company and Pentegra. 7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Company and its shareholders or affiliates and Company shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Company since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Company and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Company shall have received all documents, duly executed in form satisfactory to Company and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days after requested by Pentegra, Company and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Company authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) executed merger certificate and/or plan as required by applicable state law; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra and the original stock certificates together with blank stock powers representing the outstanding shares of Company common stock; (f) certificates of the Shareholders and a duly authorized officer of Company dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Company and Shareholder contained herein; (ii) as to the performance of and compliance by Company and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Company and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Company certifying as to the incumbency of the directors and officers of Company and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Company; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Company and any state of required foreign qualification of Company establishing that Company is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Company and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Company and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Company; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Company and Shareholders, the following, all of which shall be in a form satisfactory to counsel to Company and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Merger Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Company; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Company; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Company to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Company and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, PROVIDED, THAT THE FOREGOING SHALL NOT APPLY TO ACTIONS OR OMISSIONS OF PENTEGRA OR ITS EMPLOYEES, (E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Company or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Company or any Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Company or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Company or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Company or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Company if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Company, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Company pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Company pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Each Shareholder covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Company resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Company and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Company or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Company and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Company and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Company and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Company and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement will qualify as a reorganization within the meaning of Section 368(a) of the Code. The tax returns (and schedules thereto) of Shareholders, Company and Pentegra shall be filed in a manner consistent with such intention and Shareholders and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Company and Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Company or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Company. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Company, be relieved from its obligations to Company under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Company, on the other hand, file suit in any court or institute arbitration against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs from the other party as part of any judgment or award in such suit or arbitration. If either party commences legal action or arbitration to enforce or defend its rights under this Agreement, the prevailing party in such action shall be entitled to recover its costs, including travel, lodging and meals for itself, counsel and witnesses, actual witness fees paid and legal fees actually paid, including costs of associating local counsel with regular counsel, if actually paid. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Company and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Company or may demand from Company, and Company agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Companys or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. MARVIN V. CAVALLINO, D.D.S., A PROFESSIONAL CORPORATION By: /s/ Marvin V. Cavallino, DDS ---------------------------------------- PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman ---------------------------------------- Its: Senior Vice President ---------------------------------------- /s/ Marvin Cavallino, DDS ---------------------------------------- Marvin Cavallino, D.D.S. INDEX TO EXHIBITS EXHIBIT DESCRIPTION ------- ----------- Annex I Merger Consideration A Target Companies 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 4.16 Excluded Assets and Excluded Liabilities 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.12 8 EXHIBIT 2.12 AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG PENTEGRA DENTAL GROUP, INC., JAMES H. CLARKE, JR., D.D.S., INC. AND JAMES H. CLARKE, JR., D.D.S. TABLE OF CONTENTS PAGE ---- SECTION 1. TERMS OF THE REORGANIZATION 1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . 2 1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . 4 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . 5 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . 6 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . 9 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . 10 SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . 11 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . 12 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . 12 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . 13 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . 13 SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . 13 SECTION 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . 14 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . 14 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . 14 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . 14 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . 14 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . 14 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . 14 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . 14 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . 14 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . 14 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . 15 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . 15 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . 15 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . 15 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 9. CLOSING DELIVERIES 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . 15 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . 16 SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . 17 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . 17 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . 18 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . 19 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 11. TERMINATION SECTION 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . 20 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . 20 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . 21 SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION SECTION 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . 22 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . 22 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . 22 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . 22 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . 22 14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . 23 14.12 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . 23 14.13 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.14 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . 23 14.15 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.16 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 24 AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), James H. Clarke, Jr., D.D.S., Inc.("Company") and James H. Clarke, Jr., D.D.S., shareholders of Company (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Company operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, the Boards of Directors of the Company and Pentegra have determined that a reorganization between each of them is in the best interests of their respective companies; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Company, the "Target Companies") and simultaneously with the closing of the reorganization contemplated herein, intends to consummate its initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock"); WHEREAS, it is intended for Federal income tax purposes that the reorganization contemplated by this Agreement shall qualify as an reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE REORGANIZATION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 MERGER. Subject to and upon the terms and conditions contained herein, on the Closing Date, the Company shall be merged with and into Pentegra (or its designated affiliate, in which case, the references herein to Pentegra shall be to such designated affiliate and its shares of common stock) in accordance with this Agreement and the separate corporate existence of the Company shall thereupon cease ("Merger"). Pentegra shall be the surviving corporation in the Merger ("Surviving Corporation") and shall continue to be governed by the laws of the State of Delaware and the separate corporate existence of Pentegra with all rights, privileges, powers, immunities and purposes shall continue unaffected by the Merger. The Merger shall have the effects specified in the Delaware General Corporation Law and the Business Corporation Law. If all the conditions to the Merger set forth herein shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated in accordance herewith, the parties hereto shall cause to be properly executed and filed on the Closing Date Certificates of Merger for the Company meeting the applicable legal requirements. The Mergers shall become effective on the Closing Date or the filing of such documents, in accordance with applicable law, or at such later time as the parties hereto have agreed upon and designated in such merger filings. 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation until duly amended in accordance with their terms. 1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra immediately prior to the effective date of the Merger shall be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. The persons who are officers of Pentegra immediately prior to the effective date of the Merger shall be the officers of the Surviving Corporation and shall hold their respective offices until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal. 1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and without any action on the part of the holder thereof, all shares of the Company's common stock issued and outstanding on the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired and shall cease to exist, and each holder of a certificate of representing shares of Company common stock shall thereafter cease to have any rights with respect to such shares except the right to receive the consideration set forth on ANNEX I attached hereto (the "Merger Consideration"). Each share of common stock of the Company held in treasury at the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired without payment of any consideration therefor. On the effective date of the Merger, each share of Pentegra Common Stock issued and outstanding shall, by virtue of he Mergers, and without any action on the part of the holder thereof, continue unchanged and remain outstanding as a share of validly issued, fully paid and nonassessable share of Surviving Corporation common stock. 1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger, the Shareholders, as the holders of a certificate or certificates representing shares of Company common stock shall, upon surrender of such certificate or certificates, receive the Merger Consideration, and until the certificate or certificates of Company common stock shall have been surrendered by the Shareholder and replaced by a certificate or certificates representing Pentegra Common Stock (as set forth on ANNEX I), the certificate or certificates of Company common stock shall, for all purposes be deemed to evidence ownership of the number of shares of Pentegra Common Stock determined in accordance with the provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the Shareholders in the Merger shall be deemed for all purposes to have been issued by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at Closing the certificate or certificates representing the Company common stock owned by them, duly endorsed in blank by the Shareholders, or accompanied by duly executed blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the Shareholder's expense, affixed and cancelled. 1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Company and Shareholders shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Texas. Company has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Company does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Company a party to any joint venture or partnership. The Shareholders are the sole shareholders of Company and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Company are owned by Company in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Company on any matter, (b) securities of Company convertible into equity interests in Company, or (c) commitments, options, rights or warrants to issue any such equity interests in Company, to issue securities of Company convertible into such equity interests, or to redeem any securities of Company. No shares of capital stock of Company have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Company's stockholders. Company is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Company does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Company has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Company and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Company and Shareholders, enforceable against Company and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Company or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Company or any Shareholder is a party or by which Company or any Shareholder is bound, or violate any material restrictions of any kind to which Company is subject, or result in any lien or encumbrance on any of Company's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Company and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Company or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Company on any of its capital stock since the Balance Sheet Date. No repurchase of any of Company's capital stock has been approved, effected or is pending, or is contemplated by Company. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Company and all amendments thereto have been delivered to Pentegra. The minute books of Company contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Company since its formation. The books of account of Company have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Company have been properly recorded in such books. 2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Company as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Company. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Company or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Company, as lessor or lessee, or any condition or event of which any Shareholder or Company has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Company or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Company and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Company, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Company has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Company, including the names of any entities from whom Company previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Company in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Company has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Company and the offices held by each, (b) the most recent payroll report of Company, showing all current employees of Company and their current levels of compensation, (c) promised increases in compensation of employees of Company that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Company is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Company is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Company has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Company, and Company has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the Business nor any of the Assets is subject to any pending, nor does Company or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Company, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Company and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Company or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Company has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Company ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Company or any Shareholder, or any condition or event of which Company or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Company and Shareholders have no knowledge of any default by any other party to such Contracts. Company and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Company or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Company on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Company since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Company; (o) Repurchased, approved any repurchase or agreed to repurchase any of Company's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Company has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Company has not received any notice that any tax deficiency or delinquency has been or may be asserted against Company. There are no audits relating to taxes of Company pending or in process or, to the knowledge of Company, threatened. Company is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Company. Company has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Company nor any predecessor of Company is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Company has delivered to Pentegra correct and complete copies of Company's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Company during the three calendar year period preceding the date of this Agreement. Company has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) No Shareholder presently intends to dispose of any of the shares of Pentegra Common Stock to be received hereunder nor is a party to any plan, arrangement or agreement for the disposition of such shares. Company and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Shareholders from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Company or Company's shareholders resulting from any action taken by Company or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Company or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Company (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed professional of Company carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Company have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Company, nor any Shareholder nor any licensed professional employee of Company has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Company has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company Plan," and collectively "Company Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Company has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Company Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Company Plans. Company has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Company Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Company, any Shareholder or any licensed professional employee of Company of any Federal, state or local law or regulation. Company and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Company. 2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed professional employee or independent contractor of Company has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Company, any Shareholder and each licensed professional employee of Company. Neither Company, nor any Shareholder, nor any licensed professional employee of Company has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Company, Shareholders and Company's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Company or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Company has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Company, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Company or any organization that has a material contract or arrangement with Company. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Company's services which accounted for more than 10% of revenues of Company in the preceding fiscal year. Company has good relations with all such payors and other material payors of Company and none of such payors has notified Company that it intends to discontinue its relationship with Company or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Company and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Pentegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the reorganization contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the reorganization contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Company or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Company and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the Business and use the Assets in the ordinary course. Company and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Company and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Company and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Company. Company and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Company and Shareholder shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Company, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Company, the Business or the Assets as Pentegra or its representatives may request. Company and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Company is a party or relating to the Business or the Assets, and (b) any adverse change in Company's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Company and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Company and Shareholders shall not, and shall use its best efforts to cause Company's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Company or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Company and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Company and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Company or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Company to any employee or other person or entity (including, without limitation, any Company Plan and any liability under employment contracts with Company) allocable to services performed prior to the Closing Date. Company and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Company's employees or similar persons or entities, including, without limitation, any Company Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Company shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Company, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Company, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Company, nor will any repurchase of any of Company's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the reorganization contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Company (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Company and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Company required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Company hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Company and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Company prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Company and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Company and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Company leases any of its premises from any Shareholder or other affiliate of Company or any shareholder of Company, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dentist employees of Company designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Company and Shareholders shall remain liable under any Company Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Company's employees incurred by Company prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Company and shall be treated as Clinic employees for purposes of eligibility and participation in Company Plans. 4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the practice of dentistry is conducted by the Shareholders and the Practice. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Shareholders shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. The Company shall have transferred the Excluded Assets set forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for equity interest in the Practice, and the Company shall have distributed such equity interests in the Practice to the Shareholders. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and have filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS. Pentegra, Shareholders and Company agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Company and Shareholders shall furnish all information concerning Company and Shareholders as may be reasonable requested in connection with any such action. Company and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Company and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Company and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Company and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Company and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Company, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Each Shareholder shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused each shareholder of Company that has an existing employment agreement with Company to have terminated his or her employment agreement with Company and shall have executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Company and Pentegra. 7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Company and its shareholders or affiliates and Company shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Company since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Company and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Company shall have received all documents, duly executed in form satisfactory to Company and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days after requested by Pentegra, Company and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Company authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) executed merger certificate and/or plan as required by applicable state law; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra and the original stock certificates together with blank stock powers representing the outstanding shares of Company common stock; (f) certificates of the Shareholders and a duly authorized officer of Company dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Company and Shareholder contained herein; (ii) as to the performance of and compliance by Company and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Company and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Company certifying as to the incumbency of the directors and officers of Company and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Company; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Company and any state of required foreign qualification of Company establishing that Company is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Company and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Company, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Company; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Company and Shareholders, the following, all of which shall be in a form satisfactory to counsel to Company and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Merger Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Company; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Company; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Company to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Company and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Company or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Company or any Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Company or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Company or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Company or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Company if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Company, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Company pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Company pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Each Shareholder covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Company resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Company and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Company or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Company and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Company and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Company and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Company and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement will qualify as a reorganization within the meaning of Section 368(a) of the Code. The tax returns (and schedules thereto) of Shareholders, Company and Pentegra shall be filed in a manner consistent with such intention and Shareholders and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Company and Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Company or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Company. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument. 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Company, be relieved from its obligations to Company under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Company, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Company and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Company or may demand from Company, and Company agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Company or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoenix, Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. James H. Clarke, Jr., D.D.S., Inc. By: /s/ James H. Clarke, Jr., D.D.S. ------------------------------------ Its: President ------------------------------------ PENTEGRA DENTAL GROUP, INC. By: /s/ James L. Dunn, Jr. ------------------------------------ Its: Senior Vice-President ------------------------------------ /s/ James H. Clarke, Jr., D.D.S. ----------------------------------------- James H. Clarke, Jr., D.D.S. INDEX TO EXHIBITS EXHIBIT DESCRIPTION Annex I Merger Consideration A Target Companies 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 4.16 Excluded Assets and Excluded Liabilities 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.13 9 EXHIBIT 2.13 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., and HENRY CUTTLER, D.D.S. TABLE OF CONTENTS Page ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. 2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . 2 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . 3 2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . 3 2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . 3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 3 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . 3 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . 3 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . 6 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . 6 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . 6 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 7 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . 7 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . 7 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 7 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . 8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . 8 3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . 8 3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . 8 3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 8 Section 4. COVENANTS OF DENTIST. 4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . 9 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 9 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 9 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . 9 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . 9 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . 10 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . 10 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . 10 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . 10 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . 10 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . 10 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . 10 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . 11 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . 11 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . 11 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 11 Section 6. COVENANTS OF PENTEGRA AND DENTIST 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 12 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . 12 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . 12 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . 12 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . 12 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . 13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . 13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . 13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 8. DENTIST'S CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 13 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . 13 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . 13 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . 15 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . . . 16 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . 17 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 18 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . 19 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . 20 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . 20 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . 20 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . 21 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . 21 14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . 21 14.12 NO RULE OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . 21 14.13 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . 21 14.14 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.15 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . 21 14.16 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.17 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed effective August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra") and HENRY CUTTLER, D.D.S. ("Dentist"). WITNESSETH: WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires to receive from Dentist, certain assets of Dentist; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Dentist, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Dentist shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Dentist's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Dentist shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Dentist contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Dentist the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Dentist, including, but not limited to, liabilities arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by Dentist, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Dentist reflected on the books of Dentist at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Dentist, any licensed professional employee or independent contractor of Dentist, (vi) any liability for the payment of any taxes of Dentist, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Dentist. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Dentist shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. Dentist hereby represents and warrants to Pentegra as follows: 2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the State of New York. Dentist does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Dentist and constitute or will constitute the legal, valid and binding obligations of Dentist in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Dentist is a party or by which Dentist is bound, or violate any material restrictions of any kind to which Dentist is subject, or result in any lien or encumbrance on any of Dentist's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Dentist, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Dentist. 2.5 [INTENTIONALLY DELETED]. 2.6 [INTENTIONALLY DELETED]. 2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Dentist as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Dentist. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Dentist leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Dentist, as lessor or lessee, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Dentist has not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Dentist has no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Dentist, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Dentist has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Dentist, including the names of any entities from whom Dentist previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Dentist in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Dentist has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the most recent payroll report of Dentist, showing all current employees of Dentist and their current levels of compensation, (b) promised increases in compensation of employees of Dentist that have not yet been effected, (c) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Dentist is a party, copies of which have been delivered to Pentegra, and (d) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Dentist is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Dentist has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Dentist, and Dentist has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the Assets is subject to any pending, nor does Dentist have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Dentist, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Dentist, no basis for any such action exists, nor is there any legal impediment of which Dentist has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Dentist ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Dentist, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default. Dentist has no knowledge of any default by any other party to such Contracts. Dentist has not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Dentist, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Dentist on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (d) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (e) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Dentist since the Balance Sheet Date; (f) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (g) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (h) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (i) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (j) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (k) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; or (l) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Dentist has not received any notice that any tax deficiency or delinquency has been or may be asserted against Dentist. There are no audits relating to taxes of Dentist pending or in process or, to the knowledge of Dentist, threatened. Dentist is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Dentist. Dentist has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Dentist nor any predecessor of Dentist is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Dentist has delivered to Pentegra correct and complete copies of Dentist's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Dentist during the three calendar year period preceding the date of this Agreement. Dentist has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Dentist does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Nothing contained herein shall prohibit Dentist from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Dentist resulting from any action taken by Dentist or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Dentist does not know, or have reasonable grounds to know, of any basis for the assertion against Dentist as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Dentist (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Dentist has not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Dentist nor any licensed professional employee of Dentist has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Dentist has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Dentist has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Dentist Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Dentist Plans. Dentist has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Dentist Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Dentist or any licensed professional employee of Dentist of any Federal, state or local law or regulation. Dentist has not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Dentist. 2.24 THIRD PARTY PAYORS. Dentist and each licensed professional employee or independent contractor of Dentist has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Dentist and each licensed professional employee of Dentist. Neither Dentist nor any licensed professional employee of Dentist has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Dentist and Dentist's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by Dentist or to be furnished by Dentist to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Dentist has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or employee or family member of Dentist, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Dentist or any organization that has a material contract or arrangement with Dentist. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Dentist's services which accounted for more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has good relations with all such payors and other material payors of Dentist and none of such payors has notified Dentist that it intends to discontinue its relationship with Dentist or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Dentist as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF DENTIST. Dentist agrees that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Dentist agrees to complete the Exhibits hereto to be provided by him in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the Assets in the ordinary course. Dentist shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Dentist shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Dentist shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Dentist. Dentist shall collect its receivables and pay its trade payables in the ordinary course of business. Dentist shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Dentist, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Dentist, the Business or the Assets as Pentegra or its representatives may request. Dentist shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Dentist is a party or relating to the Business or the Assets, and (b) any adverse change in Dentist's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall use his best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Dentist shall not, and shall use its best efforts to cause Dentist's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to the Dentist, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Dentist or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Dentist will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Dentist shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Dentist or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Dentist to any employee or other person or entity (including, without limitation, any Dentist Plan and any liability under employment contracts with Dentist) allocable to services performed prior to the Closing Date. Dentist acknowledges that the purpose and intent of this covenant is to assure that Pentegra shall have no liability whatsoever at any time after the Closing Date with respect to any of Dentist's employees or similar persons or entities, including, without limitation, any Dentist Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of the Dentist (other than in the ordinary course of business) or other employee or an independent contractor of Dentist, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Dentist, its business, assets or prospects. 4.8 [INTENTIONALLY OMITTED]. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material respect the tax or financial accounting methods or practices followed by Dentist (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Dentist will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Dentist required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Dentist covenants and agrees that all of the creditors with respect to the Business and the Assets will be paid in full by Dentist prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Dentist may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Dentist agrees to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Dentist leases any of its premises from the Dentist or other affiliate of Dentist, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Dentist designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Dentist shall remain liable under any Dentist Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Dentist's employees incurred by Dentist prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and shall be treated as Clinic employees for purposes of eligibility and participation in Dentist Plans. 4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the Dentist and the Practice are to practice dentistry. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Dentist shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of thePractice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and has filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND DENTIST. Pentegra and Dentist agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Dentist shall furnish all information concerning Dentist as may be reasonable requested in connection with any such action. Dentist represents and warrants that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Dentist shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Dentist shall furnish Pentegra will all information concerning itself and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Dentist contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Dentist prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Dentist, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Dentist shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Dentist shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her employment agreement and executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra. 7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Dentist and its affiliates and Dentist shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured on irs liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Dentist since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. DENTIST'S CONDITIONS PRECEDENT. The obligations of Dentist hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly executed in form satisfactory to Dentist and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF DENTIST. Within five business days after requested by Pentegra, Dentist shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreemen and security agreement referred to therein; (b) executed Employment Agreements; (c) a bill of sale conveying the Assets to Pentegra; (d) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (e) certificates of Dentist dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Dentist contained herein; (ii) as to the performance of and compliance by Dentist with all covenants contained herein; and (iii) certifying that all conditions precedent of Dentist to the Closing have been satisfied; (f) an opinion of counsel to Dentist opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Dentist, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (g) non-foreign affidavits executed by Dentist; (h) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (i) an executed Registration Rights Agreement between Pentegra and Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (j) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Dentist the following, all of which shall be in a form satisfactory to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Dentist; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Dentist; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Dentist to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Dentist or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) [intentionally deleted] (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(B), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Dentist giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Dentist contained in this Agreement or in any certificate or other document executed and delivered by Dentist pursuant to this Agreement is or becomes untrue or breached in any material respect or if Dentist fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Dentist if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra or Dentist if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Dentist, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Dentist pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the shares of Pentegra Common Stock to be delivered to Dentist pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Dentist covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Dentist resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect its own interests in connection with the acquisition of the Pentegra Common Stock. Dentist and its representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Dentist and its representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Dentist is an "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes and acknowledges that it had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Dentist agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Dentist, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Dentist shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Dentist reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Dentist is the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Dentist from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Dentist and Pentegra shall be filed in a manner consistent with such intention and Dentist and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Dentist: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Dentist for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Dentist. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Dentist, be relieved from its obligations to Dentist under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Dentist, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman ---------------------------------- Its: Senior Vice President --------------------------------- /s/ Henry Cuttler, DDS -------------------------------------- Henry Cuttler, D.D.S. INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 [intentionally omitted] 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.14 10 EXHIBIT 2.14 AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG PENTEGRA DENTAL GROUP, INC., EDWARD T. DOUGHERTY, JR., D.D.S., P.A. and EDWARD DOUGHERTY, JR., D.D.S. TABLE OF CONTENTS PAGE ---- Section 1. TERMS OF THE REORGANIZATION 1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . 2 1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . 4 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . 9 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . .10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . .10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . .10 Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . .10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . .10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . .10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . .10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . .11 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . .11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . .11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . .11 4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . .11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . .11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . .11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . .12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . .12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . .12 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . .12 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . .13 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . .13 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . .13 Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . .13 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . .14 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . .14 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . .14 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . .14 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . .14 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . .14 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . .14 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . .14 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . .14 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . .14 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . .15 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . .15 Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . .15 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . .15 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . .15 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . .15 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . .15 9.2 DELIVERIES OF PENTEGRA . . . . . . . . . . . . . . . . . . . . . .16 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . .17 10.2 INDEMNIFICATION BY PENTEGRA. . . . . . . . . . . . . . . . . . . .17 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. . . . . . . . . . . .18 10.4 INDEMNIFICATION PROCEDURE. . . . . . . . . . . . . . . . . . . . .19 10.5 RIGHT OF SETOFF. . . . . . . . . . . . . . . . . . . . . . . . . .19 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . .20 12.2 INVESTMENTS; COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . .20 12.3 ECONOMIC RISK; SOPHISTICATION. . . . . . . . . . . . . . . . . . .21 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . .22 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . .22 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . .22 14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . .22 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . .22 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . .22 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . .23 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . .23 14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . .23 14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . .23 14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .23 14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . .24 AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and executed effective August 11, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), EDWARD T. DOUGHERTY, JR., D.D.S., P.A., a Maryland professional corporation ("Company") and EDWARD T. DOUGHERTY, JR., D.D.S., shareholder of Company (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Company operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, the Boards of Directors of the Company and Pentegra have determined that a reorganization between each of them is in the best interests of their respective companies; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Company, the "Target Companies") and simultaneously with the closing of the reorganization contemplated herein, intends to consummate its initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock"); WHEREAS, it is intended for Federal income tax purposes that the reorganization contemplated by this Agreement shall qualify as an reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE REORGANIZATION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 MERGER. Subject to and upon the terms and conditions contained herein, on the Closing Date, the Company shall be merged with and into Pentegra (or its designated affiliate, in which case, the references herein to Pentegra shall be to such designated affiliate and its shares of common stock) in accordance with this Agreement and the separate corporate existence of the Company shall thereupon cease ("Merger"). Pentegra shall be the surviving corporation in the Merger ("Surviving Corporation") and shall continue to be governed by the laws of the State of Delaware and the separate corporate existence of Pentegra with all rights, privileges, powers, immunities and purposes shall continue unaffected by the Merger. The Merger shall have the effects specified in the Delaware General Corporation Law and the Maryland Business Corporation Law. If all the conditions to the Merger set forth herein shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated in accordance herewith, the parties hereto shall cause to be properly executed and filed on the Closing Date Certificates of Merger for the Company meeting the applicable legal requirements. The Mergers shall become effective on the Closing Date or the filing of such documents, in accordance with applicable law, or at such later time as the parties hereto have agreed upon and designated in such merger filings. 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation until duly amended in accordance with their terms. 1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra immediately prior to the effective date of the Merger shall be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. The persons who are officers of Pentegra immediately prior to the effective date of the Merger shall be the officers of the Surviving Corporation and shall hold their respective offices until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal. 1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and without any action on the part of the holder thereof, all shares of the Company's common stock issued and outstanding on the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired and shall cease to exist, and each holder of a certificate of representing shares of Company common stock shall thereafter cease to have any rights with respect to such shares except the right to receive the consideration set forth on ANNEX I attached hereto (the "Merger Consideration"). Each share of common stock of the Company held in treasury at the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired without payment of any consideration therefor. On the effective date of the Merger, each share of Pentegra Common Stock issued and outstanding shall, by virtue of he Mergers, and without any action on the part of the holder thereof, continue unchanged and remain outstanding as a share of validly issued, fully paid and nonassessable share of Surviving Corporation common stock. 1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger, the Shareholders, as the holders of a certificate or certificates representing shares of Company common stock shall, upon surrender of such certificate or certificates, receive the Merger Consideration, and until the certificate or certificates of Company common stock shall have been surrendered by the Shareholder and replaced by a certificate or certificates representing Pentegra Common Stock (as set forth on ANNEX I), the certificate or certificates of Company common stock shall, for all purposes be deemed to evidence ownership of the number of shares of Pentegra Common Stock determined in accordance with the provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the Shareholders in the Merger shall be deemed for all purposes to have been issued by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at Closing the certificate or certificates representing the Company common stock owned by them, duly endorsed in blank by the Shareholders, or accompanied by duly executed blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the Shareholder's expense, affixed and cancelled. 1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Company and Shareholders shall excecute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Maryland. Company has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Company does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Company a party to any joint venture or partnership. The Shareholders are the sole shareholders of Company and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Company are owned by Company in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Company on any matter, (b) securities of Company convertible into equity interests in Company, or (c) commitments, options, rights or warrants to issue any such equity interests in Company, to issue securities of Company convertible into such equity interests, or to redeem any securities of Company. No shares of capital stock of Company have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Company's stockholders. Company is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Company does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Company has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Company and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Company and Shareholders, enforceable against Company and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Company or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Company or any Shareholder is a party or by which Company or any Shareholder is bound, or violate any material restrictions of any kind to which Company is subject, or result in any lien or encumbrance on any of Company's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Company and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Company or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Company on any of its capital stock since the Balance Sheet Date. No repurchase of any of Company's capital stock has been approved, effected or is pending, or is contemplated by Company. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Company and all amendments thereto have been delivered to Pentegra. The minute books of Company contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Company since its formation. The books of account of Company have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Company have been properly recorded in such books. 2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Company as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Company. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Company or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Company, as lessor or lessee, or any condition or event of which any Shareholder or Company has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Company or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Company and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Company, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Company has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Company, including the names of any entities from whom Company previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Company in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Company has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Company and the offices held by each, (b) the most recent payroll report of Company, showing all current employees of Company and their current levels of compensation, (c) promised increases in compensation of employees of Company that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Company is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Company is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Company has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Company, and Company has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the Business nor any of the Assets is subject to any pending, nor does Company or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Company, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Company and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Company or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Company has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Company ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Company or any Shareholder, or any condition or event of which Company or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Company and Shareholders have no knowledge of any default by any other party to such Contracts. Company and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Company or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Company on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Company since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Company; (o) Repurchased, approved any repurchase or agreed to repurchase any of Company's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Company has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Company has not received any notice that any tax deficiency or delinquency has been or may be asserted against Company. There are no audits relating to taxes of Company pending or in process or, to the knowledge of Company, threatened. Company is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Company. Company has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Company nor any predecessor of Company is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Company has delivered to Pentegra correct and complete copies of Company's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Company during the three calendar year period preceding the date of this Agreement. Company has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) No Shareholder presently intends to dispose of any of the shares of Pentegra Common Stock to be received hereunder nor is a party to any plan, arrangement or agreement for the disposition of such shares. Company and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Shareholders from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Company or Company's shareholders resulting from any action taken by Company or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Company or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Company (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed professional of Company carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Company have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Company, nor any Shareholder nor any licensed professional employee of Company has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Company has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.21 (individually "Company Plan," and collectively "Company Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Company has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Company Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Company Plans. Company has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Company Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's licensed professional employees, and the conduct of the Business and use of the Assets, have complied to the best of my knowledge with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Company, any Shareholder or any licensed professional employee of Company of any Federal, state or local law or regulation. Company and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Company. 2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed professional employee or independent contractor of Company has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Company, any Shareholder and each licensed professional employee of Company. Neither Company, nor any Shareholder, nor any licensed professional employee of Company has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Company, Shareholders and Company's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Company or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Company has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Company, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Company or any organization that has a material contract or arrangement with Company. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Company's services which accounted for more than 10% of revenues of Company in the preceding fiscal year. Company has good relations with all such payors and other material payors of Company and none of such payors has notified Company that it intends to discontinue its relationship with Company or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Company and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the reorganization contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the reorganization contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Company or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Company and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the Business and use the Assets in the ordinary course. Company and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Company and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Company and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Company. Company and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Company and Shareholdes shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Company, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Company, the Business or the Assets as Pentegra or its representatives may request. Company and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Company is a party or relating to the Business or the Assets, and (b) any adverse change in Company's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Company and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Company and Shareholders shall not, and shall use its best efforts to cause Company's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Company or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Company and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Company and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Company or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Company to any employee or other person or entity (including, without limitation, any Company Plan and any liability under employment contracts with Company) allocable to services performed prior to the Closing Date. Company and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Company's employees or similar persons or entities, including, without limitation, any Company Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Company shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Company, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Company, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Company, nor will any repurchase of any of Company's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the reorganization contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Company (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Company and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Company required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Company hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Company and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Company prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Company and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Company and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Company leases any of its premises from any Shareholder or other affiliate of Company or any shareholder of Company, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dentist employees of Company designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Company and Shareholders shall remain liable under any Company Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Company's employees incurred by Company prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Company and shall be treated as Clinic employees for purposes of eligibility and participation in Company Plans. 4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the practice of dentistry is conducted by the Shareholders and the Practice. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Shareholders shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. The Company shall have transferred the Excluded Assets set forth on EXHIBIT 4.16 to the Practice or the Dentist and shall have caused the Practice to assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for equity interest in the Practice, and the Company shall have distributed such equity interests in the Practice to the Shareholders. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and have filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS. Pentegra, Shareholders and Company agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Company and Shareholders shall furnish all information concerning Company and Shareholders as may be reasonable requested in connection with any such action. Company and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Company and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Company and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Company and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Company and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Company, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Each Shareholder shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused each shareholder of Company that has an existing employment agreement with Company to have terminated his or her employment agreement with Company and shall have executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Company and Pentegra. 7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Company and its shareholders or affiliates and Company shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Company since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Company and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Company shall have received all documents, duly executed in form satisfactory to Company and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days after requested by Pentegra, Company and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Company authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) executed merger certificate and/or plan as required by applicable state law; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra and the original stock certificates together with blank stock powers representing the outstanding shares of Company common stock; (f) certificates of the Shareholders and a duly authorized officer of Company dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Company and Shareholder contained herein; (ii) as to the performance of and compliance by Company and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Company and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Company certifying as to the incumbency of the directors and officers of Company and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Company; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Company and any state of required foreign qualification of Company establishing that Company is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Company and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Company, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Company; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Company and Shareholders, the following, all of which shall be in a form satisfactory to counsel to Company and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Merger Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Company; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Company; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Company to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Company and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Company or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Company or any Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Company or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Company or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Company or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Company if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Company, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Company pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Company pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Each Shareholder covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Company resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Company and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Company or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Company and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Company and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Company and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Company and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement will qualify as a reorganization within the meaning of Section 368(a) of the Code. The tax returns (and schedules thereto) of Shareholders, Company and Pentegra shall be filed in a manner consistent with such intention and Shareholders and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Company and Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Company or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Company. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Company, be relieved from its obligations to Company under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Company, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Company and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Company or may demand from Company, and Company agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Companys or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. EDWARD T. DOUGHERTY, JR., D.D.S., P.A. By: /s/ Edward T. Dougherty, Jr. ----------------------------------------- Edward T. Dougherty, Jr., President PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman ----------------------------------------- Its: Senior Vice President ---------------------------------------- /s/ Edward T. Dougherty, Jr. --------------------------------------------- Edward T. Dougherty, Jr., D.D.S. INDEX TO EXHIBITS EXHIBIT DESCRIPTION ------- ----------- Annex I Merger Consideration A Target Companies 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 4.16 Excluded Assets and Excluded Liabilities 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.15 11 EXHIBIT 2.15 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., FAMILY DENTAL CENTERS, P.A. and STEVE ANDERSON, D.D.S. and LINDI B. ANDERSON TABLE OF CONTENTS PAGE ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . 3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . 8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . .10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . .10 Section 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . .10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . .10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . .10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . .10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . .10 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . .11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . .11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . .11 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . .11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . .11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . .11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . .12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . .12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . .12 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . .12 Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . .12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . .13 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . .13 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . .13 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . .13 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . .13 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . .13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . .13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . .13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . .13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . .13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . .13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . .14 Section 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . .14 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . .14 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . .14 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . .14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . . . .14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . .15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . .16 10.2 INDEMNIFICATION BY PENTEGRA. . . . . . . . . . . . . . . . . . . . .16 10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . .17 10.4 INDEMNIFICATION PROCEDURE. . . . . . . . . . . . . . . . . . . . . .18 10.5 RIGHT OF SETOFF. . . . . . . . . . . . . . . . . . . . . . . . . . .18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . .19 12.2 INVESTMENTS; COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . .19 12.3 ECONOMIC RISK; SOPHISTICATION. . . . . . . . . . . . . . . . . . . .20 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . .21 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . .21 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . .21 14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . .21 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . .21 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . .22 14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . .22 14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . .22 14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), FAMILY DENTAL CENTERS, P.A., a New Mexico professional association ("Contributor") and STEVE ANDERSON, D.D.S. AND LINDI B. ANDERSON,, shareholder of Contributor (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Contributor operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra desires to receive from Contributor, certain assets of Contributor; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Contributor, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Contributor shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Contributor's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Contributor shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Contributor contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Contributor the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and, (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Contributor listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Contributor, including, but not limited to, liabilities arising under any Contributor Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by any Shareholder or Contributor, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Contributor reflected on the books of Contributor at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Contributor, any licensed professional employee or independent contractor of Contributor or any Shareholder, (vi) any liability for the payment of any taxes of Contributor or any Shareholder, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Contributor or any Shareholder. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, Contributor and Shareholders shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS. Contributor and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Contributor is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of New Mexico. Contributor has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Contributor does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Contributor a party to any joint venture or partnership. The Shareholders are the sole shareholders of Contributor and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Contributor's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Contributor are owned by Contributor in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Contributor on any matter, (b) securities of Contributor convertible into equity interests in Contributor, or (c) commitments, options, rights or warrants to issue any such equity interests in Contributor, to issue securities of Contributor convertible into such equity interests, or to redeem any securities of Contributor. No shares of capital stock of Contributor have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Contributor's stockholders. Contributor is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Contributor does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Contributor has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Contributor and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Contributor and Shareholders, enforceable against Contributor and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Contributor or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Contributor or any Shareholder is a party or by which Contributor or any Shareholder is bound, or violate any material restrictions of any kind to which Contributor is subject, or result in any lien or encumbrance on any of Contributor's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Contributor and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Contributor or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Contributor on any of its capital stock since the Balance Sheet Date. No repurchase of any of Contributor's capital stock has been approved, effected or is pending, or is contemplated by Contributor. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Contributor and all amendments thereto have been delivered to Pentegra. The minute books of Contributor contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Contributor since its formation. The books of account of Contributor have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Contributor have been properly recorded in such books. 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Contributor as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Contributor. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Contributor or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Contributor, as lessor or lessee, or any condition or event of which any Shareholder or Contributor has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Contributor or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Contributor and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Contributor, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Contributor has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Contributor, including the names of any entities from whom Contributor previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Contributor is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Contributor in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Contributor has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Contributor and the offices held by each, (b) the most recent payroll report of Contributor, showing all current employees of Contributor and their current levels of compensation, (c) promised increases in compensation of employees of Contributor that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Contributor is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Contributor is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Contributor has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Contributor, and Contributor has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Contributor nor the Business nor any of the Assets is subject to any pending, nor does Contributor or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Contributor, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Contributor and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Contributor or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Contributor ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Contributor or any Shareholder, or any condition or event of which Contributor or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Contributor and Shareholders have no knowledge of any default by any other party to such Contracts. Contributor and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Contributor are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Contributor or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Contributor on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Contributor has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Contributor since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Contributor; (o) Repurchased, approved any repurchase or agreed to repurchase any of Contributor's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. Contributor has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Contributor has not received any notice that any tax deficiency or delinquency has been or may be asserted against Contributor. There are no audits relating to taxes of Contributor pending or in process or, to the knowledge of Contributor, threatened. Contributor is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Contributor. Contributor has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Contributor nor any predecessor of Contributor is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Contributor has delivered to Pentegra correct and complete copies of Contributor's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Contributor during the three calendar year period preceding the date of this Agreement. Contributor has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Contributor or Contributor's shareholders resulting from any action taken by Contributor or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Contributor did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Contributor and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Contributor or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Contributor (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Contributor, each Shareholder and each licensed professional of Contributor carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Contributor have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Contributor, nor any Shareholder nor any licensed professional employee of Contributor has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Contributor has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Contributor Plan," and collectively "Contributor Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Contributor has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Contributor Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Contributor Plans. Contributor has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Contributor Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Shareholders and Contributor's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Contributor, any Shareholder or any licensed professional employee of Contributor of any Federal, state or local law or regulation. Contributor and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Contributor. 2.24 THIRD PARTY PAYORS. Contributor, Shareholders and each licensed professional employee or independent contractor of Contributor has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Contributor, any Shareholder and each licensed professional employee of Contributor. Neither Contributor, nor any Shareholder, nor any licensed professional employee of Contributor has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Contributor, Shareholders and Contributor's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Contributor or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Contributor or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Contributor has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Contributor, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Contributor or any organization that has a material contract or arrangement with Contributor. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Contributor's services which accounted for more than 10% of revenues of Contributor in the preceding fiscal year. Contributor has good relations with all such payors and other material payors of Contributor and none of such payors has notified Contributor that it intends to discontinue its relationship with Contributor or to deny any claims submitted to such payor for payment. 2.29 NO INTENTION TO DISPOSE OF SHARES. Contributor does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Contributor and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Contributor from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Contributor and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware, and is or shall be as of the Closing, duly qualified to do business in New Mexico. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Contributor or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS. Contributor and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Contributor and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Contributor and Shareholders shall operate the Business and use the Assets in the ordinary course. Contributor and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Contributor and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Contributor and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Contributor. Contributor and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Contributor and Shareholdes shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Contributor and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Contributor, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Contributor, the Business or the Assets as Pentegra or its representatives may request. Contributor and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Contributor is a party or relating to the Business or the Assets, and (b) any adverse change in Contributor's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Contributor and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of Contributor contemplated by the Service Agreement and to conduct the intended business of Contributor and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Contributor and Shareholders shall not, and shall use its best efforts to cause Contributor's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Contributor or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Contributor and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Contributor and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Contributor or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Contributor to any employee or other person or entity (including, without limitation, any Contributor Plan and any liability under employment contracts with Contributor) allocable to services performed prior to the Closing Date. Contributor and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Contributor's employees or similar persons or entities, including, without limitation, any Contributor Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Contributor, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Contributor, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Contributor, nor will any repurchase of any of Contributor's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Contributor and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Contributor (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Contributor and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Contributor required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Contributor hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Contributor and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Contributor prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Contributor and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Contributor and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Contributor and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Contributor leases any of its premises from any Shareholder or other affiliate of Contributor or any shareholder of Contributor, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Contributor and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Contributor designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Contributor and Shareholders shall remain liable under any Contributor Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Contributor's employees incurred by Contributor prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that all employees of Contributor hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Contributor and shall be treated as Clinic employees for purposes of eligibility and participation in Contributor Plans. 4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS. Pentegra, Shareholders and Contributor agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Contributor and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Contributor and Shareholders shall furnish all information concerning Contributor and Shareholders as may be reasonable requested in connection with any such action. Pentegegra, Contributor and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Contributor and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Contributor and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Contributor and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Contributor and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Contributor and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Contributor, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Contributor. Each Shareholder shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of Contributor under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and caused each shareholder of Contributor that has an existing employment agreement with Contributor to have terminated his or her employment agreement with Contributor and shall have executed an employment agreement ("Employment Agreement") with Contributor in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Contributor and Pentegra. 7.9 CONSENTS AND APPROVALS. Contributor and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Contributor and its shareholders or affiliates and Contributor shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Contributor and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Contributor since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Contributor and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Contributor shall have received all documents, duly executed in form satisfactory to Contributor and its counsel, referred to in SECTION 9.2, including, without limitation, the Service Agreement. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. Within five business days after requested by Pentegra, Contributor and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Contributor authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) a bill of sale conveying the Assets to Pentegra; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (f) certificates of the Shareholders and a duly authorized officer of Contributor dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Contributor and Shareholder contained herein; (ii) as to the performance of and compliance by Contributor and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Contributor and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Contributor certifying as to the incumbency of the directors and officers of Contributor and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Contributor; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Contributor and any state of required foreign qualification of Contributor establishing that Contributor is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Contributor and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Contributor, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Contributor; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Contributor, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Contributor and Shareholder, the following, all of which shall be in a form satisfactory to counsel to Contributor and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Contributor; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Contributor; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Contributor to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Contributor and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD CONTRIBUTOR AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING CONTRIBUTOR AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. (D) TAXES OF PENTEGRA ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AND (F) ANY LIABILITY OF PENTEGRA FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. CONTRIBUTOR AND SHAREHOLDERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY CONTRIBUTOR OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE CONTRIBUTOR OR SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF CONTRIBUTOR OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF CONTRIBUTOR OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE CONTRIBUTOR OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Contributor or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Contributor or Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Contributor or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Contributor or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Contributor or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Contributor if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Contributor, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Contributor shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Contributor pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Contributor pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Contributor pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Contributor covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Contributor resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Contributor, Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Contributor, Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Contributor and Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Contributor and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Contributor or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Contributor and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Contributor and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Contributor and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Contributor or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Contributor and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Shareholders, Contributor and Pentegra shall be filed in a manner consistent with such intention and Contributor and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. No party hereto shall take any action inconsistent with this transaction qualifying as an exchange meeting the requirements of Section 351 of the Code. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Contributor or Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Contributor or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Contributor. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF CONTRIBUTOR AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Contributor, be relieved from its obligations to Contributor under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Contributor, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Contributor and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Contributor or may demand from Contributor, and Contributor agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Contributors or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. FAMILY DENTAL CENTERS, P.A. By: /s/ S. Anderson, DDS ------------------------------------ Its: /s/ Owner ----------------------------------- PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman ------------------------------------ Its: Senior Vice President ----------------------------------- /S/ S. ANDERSON ---------------------------------------- Steve Anderson, D.D.S. /S/ L. ANDERSON ---------------------------------------- Lindi B. Anderson, D.D.S. INDEX TO EXHIBITS EXHIBIT DESCRIPTION ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.16 12 EXHIBIT 2.16 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., and RICHARD H. FETTIG, D.D.S. TABLE OF CONTENTS Page ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. 2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . 2 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 3 2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 3 2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . 3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . 3 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . 3 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . 3 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . 6 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . 6 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . 6 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . 6 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . 7 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . 7 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . 7 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . 7 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . 7 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . 8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . 8 3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . 8 3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . 8 3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . 8 Section 4. COVENANTS OF DENTIST. 4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . 9 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . 9 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . 9 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . 9 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . 9 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . 9 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 9 4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . .10 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . .10 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . .10 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . .10 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . .10 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . .10 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . .10 4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . .10 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . .11 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . .11 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . .11 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . .11 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . .11 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . .11 Section 6. COVENANTS OF PENTEGRA AND DENTIST 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . .12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . .12 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . .12 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . .12 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . .12 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . .12 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . .12 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . .13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . .13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . .13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . .13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . .13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . .13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . .13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . .13 Section 8. DENTIST'S CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . .13 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . .13 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . .13 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . .13 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . .14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . .14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . .15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . .15 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . .16 10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . .16 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . .17 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . .18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . .18 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . .19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . .19 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . .19 14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . .20 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . .20 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . .20 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . .20 14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . .21 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . .21 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . .21 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . .21 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . .21 14.12 NO RULE OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . .21 14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . .21 14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.15 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . .21 14.16 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . .22 14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . .23 ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed effective August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra") and RICHARD H. FETTIG, D.D.S. ("Dentist"). WITNESSETH: WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires to receive from Dentist, certain assets of Dentist; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Dentist, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Dentist shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Dentist's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Dentist shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Dentist contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Dentist the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Dentist, including, but not limited to, liabilities arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of- trade laws by Dentist, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Dentist reflected on the books of Dentist at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Dentist, any licensed professional employee or independent contractor of Dentist, (vi) any liability for the payment of any taxes of Dentist, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Dentist. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Dentist shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. Dentist hereby represents and warrants to Pentegra as follows: 2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the State of North Dakota. Dentist does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Dentist and constitute or will constitute the legal, valid and binding obligations of Dentist in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Dentist is a party or by which Dentist is bound, or violate any material restrictions of any kind to which Dentist is subject, or result in any lien or encumbrance on any of Dentist's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Dentist, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Dentist. 2.5 [INTENTIONALLY DELETED]. 2.6 [INTENTIONALLY DELETED]. 2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Dentist as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Dentist. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Dentist leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Dentist, as lessor or lessee, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Dentist has not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Dentist has no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Dentist, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Dentist has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Dentist, including the names of any entities from whom Dentist previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Dentist in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Dentist has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the most recent payroll report of Dentist, showing all current employees of Dentist and their current levels of compensation, (b) promised increases in compensation of employees of Dentist that have not yet been effected, (c) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Dentist is a party, copies of which have been delivered to Pentegra, and (d) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Dentist is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Dentist has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Dentist, and Dentist has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the Assets is subject to any pending, nor does Dentist have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Dentist, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Dentist, no basis for any such action exists, nor is there any legal impediment of which Dentist has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Dentist ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Dentist, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default. Dentist has no knowledge of any default by any other party to such Contracts. Dentist has not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Dentist, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Dentist on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (d) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (e) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Dentist since the Balance Sheet Date; (f) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (g) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (h) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (i) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (j) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (k) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; or (l) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Dentist has not received any notice that any tax deficiency or delinquency has been or may be asserted against Dentist. There are no audits relating to taxes of Dentist pending or in process or, to the knowledge of Dentist, threatened. Dentist is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Dentist. Dentist has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Dentist nor any predecessor of Dentist is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Dentist has delivered to Pentegra correct and complete copies of Dentist's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Dentist during the three calendar year period preceding the date of this Agreement. Dentist has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Dentist does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Nothing contained herein shall prohibit Dentist from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Dentist resulting from any action taken by Dentist or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Dentist does not know, or have reasonable grounds to know, of any basis for the assertion against Dentist as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Dentist (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Dentist has not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Dentist nor any licensed professional employee of Dentist has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Dentist has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Dentist has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Dentist Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Dentist Plans. Dentist has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Dentist Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Dentist or any licensed professional employee of Dentist of any Federal, state or local law or regulation. Dentist has not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Dentist. 2.24 THIRD PARTY PAYORS. Dentist and each licensed professional employee or independent contractor of Dentist has timely filed all claims or other reports required to be filed with respect to the purchase of services by third- party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Dentist and each licensed professional employee of Dentist. Neither Dentist nor any licensed professional employee of Dentist has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Dentist and Dentist's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by Dentist or to be furnished by Dentist to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Dentist has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or employee or family member of Dentist, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Dentist or any organization that has a material contract or arrangement with Dentist. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Dentist's services which accounted for more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has good relations with all such payors and other material payors of Dentist and none of such payors has notified Dentist that it intends to discontinue its relationship with Dentist or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Dentist as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF DENTIST. Dentist agrees that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Dentist agrees to complete the Exhibits hereto to be provided by him in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the Assets in the ordinary course. Dentist shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Dentist shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Dentist shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Dentist. Dentist shall collect its receivables and pay its trade payables in the ordinary course of business. Dentist shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Dentist, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Dentist, the Business or the Assets as Pentegra or its representatives may request. Dentist shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Dentist is a party or relating to the Business or the Assets, and (b) any adverse change in Dentist's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall use his best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Dentist shall not, and shall use its best efforts to cause Dentist's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to the Dentist, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Dentist or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Dentist will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Dentist shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Dentist or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Dentist to any employee or other person or entity (including, without limitation, any Dentist Plan and any liability under employment contracts with Dentist) allocable to services performed prior to the Closing Date. Dentist acknowledges that the purpose and intent of this covenant is to assure that Pentegra shall have no liability whatsoever at any time after the Closing Date with respect to any of Dentist's employees or similar persons or entities, including, without limitation, any Dentist Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of the Dentist (other than in the ordinary course of business) or other employee or an independent contractor of Dentist, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Dentist, its business, assets or prospects. 4.8 [INTENTIONALLY OMITTED]. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material respect the tax or financial accounting methods or practices followed by Dentist (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Dentist will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Dentist required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Dentist covenants and agrees that all of the creditors with respect to the Business and the Assets will be paid in full by Dentist prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Dentist may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Dentist agrees to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Dentist leases any of its premises from the Dentist or other affiliate of Dentist, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Dentist designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Dentist shall remain liable under any Dentist Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Dentist's employees incurred by Dentist prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and shall be treated as Clinic employees for purposes of eligibility and participation in Dentist Plans. 4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the Dentist and the Practice are to practice dentistry. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Dentist shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of thePractice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and has filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND DENTIST. Pentegra and Dentist agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Dentist shall furnish all information concerning Dentist as may be reasonable requested in connection with any such action. Dentist represents and warrants that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Dentist shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Dentist shall furnish Pentegra will all information concerning itself and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Dentist contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Dentist prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Dentist, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Dentist shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Dentist shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her employment agreement and executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra. 7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Dentist and its affiliates and Dentist shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured on irs liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Dentist since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. DENTIST'S CONDITIONS PRECEDENT. The obligations of Dentist hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly executed in form satisfactory to Dentist and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF DENTIST. Within five business days after requested by Pentegra, Dentist shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreemen and security agreement referred to therein; (b) executed Employment Agreements; (c) a bill of sale conveying the Assets to Pentegra; (d) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (e) certificates of Dentist dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Dentist contained herein; (ii) as to the performance of and compliance by Dentist with all covenants contained herein; and (iii) certifying that all conditions precedent of Dentist to the Closing have been satisfied; (f) an opinion of counsel to Dentist opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Dentist, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (g) non-foreign affidavits executed by Dentist; (h) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (i) an executed Registration Rights Agreement between Pentegra and Dentist, in substantially the form attached hereto as EXHIBIT 9.1(L) (the "Registration Rights Agreement"); and (j) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Dentist the following, all of which shall be in a form satisfactory to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Dentist; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Dentist; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Dentist to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Dentist or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Dentist giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Dentist contained in this Agreement or in any certificate or other document executed and delivered by Dentist pursuant to this Agreement is or becomes untrue or breached in any material respect or if Dentist fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Dentist if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra or Dentist if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Dentist, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Dentist pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the shares of Pentegra Common Stock to be delivered to Dentist pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Dentist covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Dentist resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect its own interests in connection with the acquisition of the Pentegra Common Stock. Dentist and its representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Dentist and its representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Dentist is an "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes and acknowledges that it had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Dentist agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Dentist, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Dentist shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Dentist reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Dentist is the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Dentist from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Dentist and Pentegra shall be filed in a manner consistent with such intention and Dentist and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Dentist: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Dentist for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Dentist. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument. 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Dentist, be relieved from its obligations to Dentist under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Dentist, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro- rated among Dentist and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman ---------------------------------- Its: Senior Vice President --------------------------------- /s/ Richard H. Fettig, D.D.S. ------------------------------------- Richard H. Fettig, D.D.S. INDEX TO EXHIBITS EXHIBIT DESCRIPTION ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 [intentionally omitted] 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.17 13 EXHIBIT 2.17 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., ALAN H. GERBHOLZ, D.D.S., P.C., and THE AMG TRUST TABLE OF CONTENTS Page ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . 3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . 8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . 10 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . 12 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . 12 Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . 13 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . 13 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . 13 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . 13 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . 13 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . 13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . 13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . 13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . 14 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . 14 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . 16 10.2 INDEMNIFICATION BY PENTEGRA. . . . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . 17 10.4 INDEMNIFICATION PROCEDURE. . . . . . . . . . . . . . . . . . . . . . 18 10.5 RIGHT OF SETOFF. . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . 19 12.2 INVESTMENTS; COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION. . . . . . . . . . . . . . . . . . . . 20 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . 21 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . 21 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . 21 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . 22 14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . 22 14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . 22 14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed effective August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), ALAN H. GERBHOLZ, D.D.S., P.C., a Colorado professional corporation ("Contributor") and THE AMG TRUST, shareholder of Contributor (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Contributor operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra desires to receive from Contributor, certain assets of Contributor; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Contributor, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Contributor shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Contributor's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Contributor shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Contributor contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Contributor the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Contributor listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Contributor, including, but not limited to, liabilities arising under any Contributor Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by any Shareholder or Contributor, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Contributor reflected on the books of Contributor at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Contributor, any licensed professional employee or independent contractor of Contributor or any Shareholder, (vi) any liability for the payment of any taxes of Contributor or any Shareholder, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Contributor or any Shareholder. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, Contributor and Shareholders shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS. Contributor and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Contributor is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Colorado. Contributor has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Contributor does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Contributor a party to any joint venture or partnership. The Shareholders are the sole shareholders of Contributor and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Contributor's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Contributor are owned by Contributor in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Contributor on any matter, (b) securities of Contributor convertible into equity interests in Contributor, or (c) commitments, options, rights or warrants to issue any such equity interests in Contributor, to issue securities of Contributor convertible into such equity interests, or to redeem any securities of Contributor. No shares of capital stock of Contributor have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Contributor's stockholders. Contributor is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Contributor does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Contributor has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Contributor and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Contributor and Shareholders, enforceable against Contributor and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Contributor or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Contributor or any Shareholder is a party or by which Contributor or any Shareholder is bound, or violate any material restrictions of any kind to which Contributor is subject, or result in any lien or encumbrance on any of Contributor's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Contributor and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Contributor or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Contributor on any of its capital stock since the Balance Sheet Date. No repurchase of any of Contributor's capital stock has been approved, effected or is pending, or is contemplated by Contributor. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Contributor and all amendments thereto have been delivered to Pentegra. The minute books of Contributor contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Contributor since its formation. The books of account of Contributor have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Contributor have been properly recorded in such books. 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Contributor as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Contributor. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Contributor or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Contributor, as lessor or lessee, or any condition or event of which any Shareholder or Contributor has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Contributor or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Contributor and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Contributor, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Contributor has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Contributor, including the names of any entities from whom Contributor previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Contributor is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Contributor in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Contributor has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Contributor and the offices held by each, (b) the most recent payroll report of Contributor, showing all current employees of Contributor and their current levels of compensation, (c) promised increases in compensation of employees of Contributor that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Contributor is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Contributor is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Contributor has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Contributor, and Contributor has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Contributor nor the Business nor any of the Assets is subject to any pending, nor does Contributor or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Contributor, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Contributor and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Contributor or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Contributor ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Contributor or any Shareholder, or any condition or event of which Contributor or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Contributor and Shareholders have no knowledge of any default by any other party to such Contracts. Contributor and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Contributor are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Contributor or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Contributor on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Contributor has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Contributor since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Contributor; (o) Repurchased, approved any repurchase or agreed to repurchase any of Contributor's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Contributor has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Contributor has not received any notice that any tax deficiency or delinquency has been or may be asserted against Contributor. There are no audits relating to taxes of Contributor pending or in process or, to the knowledge of Contributor, threatened. Contributor is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Contributor. Contributor has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Contributor nor any predecessor of Contributor is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Contributor has delivered to Pentegra correct and complete copies of Contributor's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Contributor during the three calendar year period preceding the date of this Agreement. Contributor has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Contributor does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Contributor and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Contributor from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Contributor or Contributor's shareholders resulting from any action taken by Contributor or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Contributor did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Contributor and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Contributor or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Contributor (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Contributor, each Shareholder and each licensed professional of Contributor carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Contributor have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Contributor, nor any Shareholder nor any licensed professional employee of Contributor has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Contributor has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Contributor Plan," and collectively "Contributor Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Contributor has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Contributor Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Contributor Plans. Contributor has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Contributor Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Shareholders and Contributor's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Contributor, any Shareholder or any licensed professional employee of Contributor of any Federal, state or local law or regulation. Contributor and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Contributor. 2.24 THIRD PARTY PAYORS. Contributor, Shareholders and each licensed professional employee or independent contractor of Contributor has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Contributor, any Shareholder and each licensed professional employee of Contributor. Neither Contributor, nor any Shareholder, nor any licensed professional employee of Contributor has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Contributor, Shareholders and Contributor's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self- referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Contributor or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Contributor or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Contributor has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Contributor, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Contributor or any organization that has a material contract or arrangement with Contributor. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Contributor's services which accounted for more than 10% of revenues of Contributor in the preceding fiscal year. Contributor has good relations with all such payors and other material payors of Contributor and none of such payors has notified Contributor that it intends to discontinue its relationship with Contributor or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Contributor and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Contributor or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS. Contributor and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Contributor and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Contributor and Shareholders shall operate the Business and use the Assets in the ordinary course. Contributor and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Contributor and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Contributor and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Contributor. Contributor and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Contributor and Shareholdes shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Contributor and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Contributor, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Contributor, the Business or the Assets as Pentegra or its representatives may request. Contributor and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Contributor is a party or relating to the Business or the Assets, and (b) any adverse change in Contributor's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Contributor and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of Contributor contemplated by the Service Agreement and to conduct the intended business of Contributor and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Contributor and Shareholders shall not, and shall use its best efforts to cause Contributor's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Contributor or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Contributor and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Contributor and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Contributor or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Contributor to any employee or other person or entity (including, without limitation, any Contributor Plan and any liability under employment contracts with Contributor) allocable to services performed prior to the Closing Date. Contributor and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Contributor's employees or similar persons or entities, including, without limitation, any Contributor Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Contributor, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Contributor, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Contributor, nor will any repurchase of any of Contributor's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Contributor and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Contributor (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Contributor and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Contributor required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Contributor hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Contributor and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Contributor prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Contributor and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Contributor and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Contributor and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Contributor leases any of its premises from any Shareholder or other affiliate of Contributor or any shareholder of Contributor, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Contributor and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Contributor designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Contributor and Shareholders shall remain liable under any Contributor Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Contributor's employees incurred by Contributor prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that all employees of Contributor hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Contributor and shall be treated as Clinic employees for purposes of eligibility and participation in Contributor Plans. 4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS. Pentegra, Shareholders and Contributor agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Contributor and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Contributor and Shareholders shall furnish all information concerning Contributor and Shareholders as may be reasonable requested in connection with any such action. Contributor and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Contributor and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Contributor and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Contributor and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Contributor and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Contributor and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Contributor, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Contributor. Each Shareholder shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of Contributor under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and caused each shareholder of Contributor that has an existing employment agreement with Contributor to have terminated his or her employment agreement with Contributor and shall have executed an employment agreement ("Employment Agreement") with Contributor in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Contributor and Pentegra. 7.9 CONSENTS AND APPROVALS. Contributor and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Contributor and its shareholders or affiliates and Contributor shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Contributor and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Contributor since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Contributor and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Contributor shall have received all documents, duly executed in form satisfactory to Contributor and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. Within five business days after requested by Pentegra, Contributor and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Contributor authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) a bill of sale conveying the Assets to Pentegra; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (f) certificates of the Shareholders and a duly authorized officer of Contributor dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Contributor and Shareholder contained herein; (ii) as to the performance of and compliance by Contributor and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Contributor and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Contributor certifying as to the incumbency of the directors and officers of Contributor and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Contributor; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Contributor and any state of required foreign qualification of Contributor establishing that Contributor is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Contributor and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Contributor, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Contributor; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Contributor, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Contributor and Shareholder, the following, all of which shall be in a form satisfactory to counsel to Contributor and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Contributor; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Contributor; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Contributor to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Contributor and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD CONTRIBUTOR AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING CONTRIBUTOR AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. CONTRIBUTOR AND SHAREHOLDERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY CONTRIBUTOR OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE CONTRIBUTOR OR SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF CONTRIBUTOR OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF CONTRIBUTOR OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(B), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE CONTRIBUTOR OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Contributor or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Contributor or Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Contributor or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Contributor or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Contributor or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Contributor if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Contributor, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Contributor shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Contributor pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Contributor pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Contributor pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Contributor covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Contributor resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Contributor, Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Contributor, Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Contributor and Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Contributor and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Contributor or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Contributor and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Contributor and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Contributor and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Contributor or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Contributor and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Shareholders, Contributor and Pentegra shall be filed in a manner consistent with such intention and Contributor and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Contributor or Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Contributor or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Contributor. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF CONTRIBUTOR AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Contributor, be relieved from its obligations to Contributor under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Contributor, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro- rated among Contributor and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Contributor or may demand from Contributor, and Contributor agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Contributors or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. ALAN H. GERBHOLZ, D.D.S., P.C. By: The AMG Trust, Shareholder By: /s/ Alan H. Gerbholz --------------------------------------- Alan H. Gerbholz, Co-Trustee By: /s/ Melanie L. Gerbholz --------------------------------------- Melanie L. Gerbholz, Co-Trustee PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman --------------------------------------- Its: Senior VP --------------------------------------- THE AMG TRUST By: /s/ Alan H. Gerbholz --------------------------------------- Alan H. Gerbholz, Co-Trustee By: /s/ Melanie L. Gerbholz --------------------------------------- Melanie L. Gerbholz, Co-Trustee INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.18 14 EXHIBIT 2.18 AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG PENTEGRA DENTAL GROUP, INC., MICHAEL J. GERSHTENSON, D.D.S., P.C. and MICHAEL J. GERSHTENSON, D.D.S. TABLE OF CONTENTS
E Page ---- Section 1. TERMS OF THE REORGANIZATION 1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . . . . 2 1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 4 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 9 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.17 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.18 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.19 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.20 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 12 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 12 Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 13 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 13 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 13 7.7 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.8 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 14 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 14 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 14 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . . . 17 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 18 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 19 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 20 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . 21 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . 22 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . 22 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . 22 14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), MICHAEL J. GERSHTENSON, D.D.S., P.C., a Colorado professional corporation ("Company") and MICHAEL J. GERSHTENSON, D.D.S., the sole shareholder of the Company (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Company operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, the Boards of Directors of the Company and Pentegra have determined that a reorganization between each of them is in the best interests of their respective companies; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Company, the "Target Companies") and simultaneously with the closing of the reorganization contemplated herein, intends to consummate its initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock"); WHEREAS, it is intended for Federal income tax purposes that the reorganization contemplated by this Agreement shall qualify as an reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. . NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE REORGANIZATION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 MERGER. Subject to and upon the terms and conditions contained herein, on the Closing Date, the Company shall be merged with and into Pentegra (or its designated affiliate, in which case, the references herein to Pentegra shall be to such designated affiliate and its shares of common stock) in accordance with this Agreement and the separate corporate existence of the Company shall thereupon cease ("Merger"). Pentegra shall be the surviving corporation in the Merger ("Surviving Corporation") and shall continue to be governed by the laws of the State of Delaware and the separate corporate existence of Pentegra with all rights, privileges, powers, immunities and purposes shall continue unaffected by the Merger. The Merger shall have the effects specified in the Delaware General Corporation Law and the Colorado Business Corporation Law. If all the conditions to the Merger set forth herein shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated in accordance herewith, the parties hereto shall cause to be properly executed and filed on the Closing Date Certificates of Merger for the Company meeting the applicable legal requirements. The Mergers shall become effective on the Closing Date or the filing of such documents, in accordance with applicable law, or at such later time as the parties hereto have agreed upon and designated in such merger filings. 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation until duly amended in accordance with their terms. 1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra immediately prior to the effective date of the Merger shall be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. The persons who are officers of Pentegra immediately prior to the effective date of the Merger shall be the officers of the Surviving Corporation and shall hold their respective offices until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal. 1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and without any action on the part of the holder thereof, all shares of the Company's common stock issued and outstanding on the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired and shall cease to exist, and each holder of a certificate of representing shares of Company common stock shall thereafter cease to have any rights with respect to such shares except the right to receive the consideration set forth on ANNEX I attached hereto (the "Merger Consideration"). Each share of common stock of the Company held in treasury at the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired without payment of any consideration therefor. On the effective date of the Merger, each share of Pentegra Common Stock issued and outstanding shall, by virtue of the Mergers, and without any action on the part of the holder thereof, continue unchanged and remain outstanding as a share of validly issued, fully paid and nonassessable share of Surviving Corporation common stock. 1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger, the Shareholders, as the holders of a certificate or certificates representing shares of Company common stock shall, upon surrender of such certificate or certificates, receive the Merger Consideration, and until the certificate or certificates of Company common stock shall have been surrendered by the Shareholder and replaced by a certificate or certificates representing Pentegra Common Stock (as set forth on ANNEX I), the certificate or certificates of Company common stock shall, for all purposes be deemed to evidence ownership of the number of shares of Pentegra Common Stock determined in accordance with the provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the Shareholders in the Merger shall be deemed for all purposes to have been issued by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at Closing the certificate or certificates representing the Company common stock owned by them, duly endorsed in blank by the Shareholders, or accompanied by duly executed blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the Shareholder's expense, affixed and cancelled. 1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Company and Shareholders shall excecute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Colorado. Company has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Company does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Company a party to any joint venture or partnership. The Shareholders are the sole shareholders of Company and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Company are owned by Company in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Company on any matter, (b) securities of Company convertible into equity interests in Company, or (c) commitments, options, rights or warrants to issue any such equity interests in Company, to issue securities of Company convertible into such equity interests, or to redeem any securities of Company. No shares of capital stock of Company have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Company's stockholders. Company is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Company does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Company has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Company and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Company and Shareholders, enforceable against Company and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Company or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Company or any Shareholder is a party or by which Company or any Shareholder is bound, or violate any material restrictions of any kind to which Company is subject, or result in any lien or encumbrance on any of Company's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Company and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Company or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Company on any of its capital stock since the Balance Sheet Date. No repurchase of any of Company's capital stock has been approved, effected or is pending, or is contemplated by Company. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Company and all amendments thereto have been delivered to Pentegra. The minute books of Company contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Company since its formation. The books of account of Company have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Company have been properly recorded in such books. 2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Company as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Company. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Company or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Company, as lessor or lessee, or any condition or event of which any Shareholder or Company has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Company or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Company and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Company, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Company has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Company, including the names of any entities from whom Company previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Company in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Company has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Company and the offices held by each, (b) the most recent payroll report of Company, showing all current employees of Company and their current levels of compensation, (c) promised increases in compensation of employees of Company that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Company is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Company is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Company has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Company, and Company has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the Business nor any of the Assets is subject to any pending, nor does Company or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Company, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Company and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Company or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Company has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Company ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Company or any Shareholder, or any condition or event of which Company or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Company and Shareholders have no knowledge of any default by any other party to such Contracts. Company and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Company or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Company on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Company since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Company; (o) Repurchased, approved any repurchase or agreed to repurchase any of Company's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Company has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Company has not received any notice that any tax deficiency or delinquency has been or may be asserted against Company. There are no audits relating to taxes of Company pending or in process or, to the knowledge of Company, threatened. Company is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Company. Company has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Company nor any predecessor of Company is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Company has delivered to Pentegra correct and complete copies of Company's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Company during the three calendar year period preceding the date of this Agreement. Company has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) No Shareholder presently intends to dispose of any of the shares of Pentegra Common Stock to be received hereunder nor is a party to any plan, arrangement or agreement for the disposition of such shares. Company and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Shareholders from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Company or Company's shareholders resulting from any action taken by Company or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Company or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Company (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed professional of Company carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Company have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Company, nor any Shareholder nor any licensed professional employee of Company has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Company has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company Plan," and collectively "Company Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Company has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Company Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Company Plans. Company has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Company Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Company, any Shareholder or any licensed professional employee of Company of any Federal, state or local law or regulation. Company and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Company. 2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed professional employee or independent contractor of Company has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Company, any Shareholder and each licensed professional employee of Company. Neither Company, nor any Shareholder, nor any licensed professional employee of Company has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Company, Shareholders and Company's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Company or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Company has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Company, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Company or any organization that has a material contract or arrangement with Company. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Company's services which accounted for more than 10% of revenues of Company in the preceding fiscal year. Company has good relations with all such payors and other material payors of Company and none of such payors has notified Company that it intends to discontinue its relationship with Company or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Company and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the reorganization contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the reorganization contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Company or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Company and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the Business and use the Assets in the ordinary course. Company and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Company and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Company and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Company. Company and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Company and Shareholdes shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Company, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Company, the Business or the Assets as Pentegra or its representatives may request. Company and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Company is a party or relating to the Business or the Assets, and (b) any adverse change in Company's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Company and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Company and Shareholders shall not, and shall use its best efforts to cause Company's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Company or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Company and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Company and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Company or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Company to any employee or other person or entity (including, without limitation, any Company Plan and any liability under employment contracts with Company) allocable to services performed prior to the Closing Date. Company and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Company's employees or similar persons or entities, including, without limitation, any Company Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Company shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Company, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Company, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Company, nor will any repurchase of any of Company's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the reorganization contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Company (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Company and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Company required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Company hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Company and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Company prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Company and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Company and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Company leases any of its premises from any Shareholder or other affiliate of Company or any shareholder of Company, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dentist employees of Company designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Company and Shareholders shall remain liable under any Company Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Company's employees incurred by Company prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Company and shall be treated as Clinic employees for purposes of eligibility and participation in Company Plans. 4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 [INTENTIONALLY DELETED] 4.17 [INTENTIONALLY DELETED] 4.18 [INTENTIONALLY DELETED] 4.19 [INTENTIONALLY DELETED] 4.20 [INTENTIONALLY DELETED] SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS. Pentegra, Shareholders and Company agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Company and Shareholders shall furnish all information concerning Company and Shareholders as may be reasonable requested in connection with any such action. Company and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Company and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Company and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Company and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Company and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Company, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 [INTENTIONALLY DELETED] 7.8 [INTENTIONALLY DELETED] 7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Company and its shareholders or affiliates and Company shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Company since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Company and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Company shall have received all documents, duly executed in form satisfactory to Company and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days after requested by Pentegra, Company and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) [intentionally deleted]; (b) [intentionally deleted]; (c) a copy of the resolutions of the Board of Directors of Company authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) executed merger certificate and/or plan as required by applicable state law; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra and the original stock certificates together with blank stock powers representing the outstanding shares of Company common stock; (f) certificates of the Shareholders and a duly authorized officer of Company dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Company and Shareholder contained herein; (ii) as to the performance of and compliance by Company and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Company and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Company certifying as to the incumbency of the directors and officers of Company and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Company; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Company and any state of required foreign qualification of Company establishing that Company is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Company and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Company, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Company; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Company, in substantially the form attached hereto as EXHIBIT 9.1(L) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement and any other instruments and agreements reasonably requested by Pentegra in connection with any service arrangements to be provided by Pentegra to Shareholder. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Company and Shareholders, the following, all of which shall be in a form satisfactory to counsel to Company and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Merger Consideration; (b) [intentionally deleted]; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Company; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Company; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Company to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Company and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Company or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra hereunder or under any other agreements executed between Pentegra and Shareholder. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Company or any Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Company or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Company or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Company or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Company if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Company, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Company pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Company pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Each Shareholder covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Company resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Company and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Company or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Company and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Company and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Company and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Company and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement will qualify as a reorganization within the meaning of Section 368(a) of the Code. The tax returns (and schedules thereto) of Shareholders, Company and Pentegra shall be filed in a manner consistent with such intention and Shareholders and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Company and Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Company or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Company. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Company, be relieved from its obligations to Company under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Company, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Company and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Company or may demand from Company, and Company agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Companys or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. MICHAEL J. GERSHTENSON, D.D.S., P.C. By: /s/ Michael J. Gershtenson, D.D.S. --------------------------------------- Its: President --------------------------------------- PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman --------------------------------------- Its: Senior VP --------------------------------------- /s/ Michael Gershtenson, D.D.S. ------------------------------------------ Michael Gershtenson, D.D.S. INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Merger Consideration A Target Companies 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 4.16 Excluded Assets and Excluded Liabilities 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.19 15 EXHIBIT 2.19 AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG PENTEGRA DENTAL GROUP, INC., MACK E. GREDER, D.D.S., P.C. and MACK GREDER, D.D.S. TABLE OF CONTENTS
PAGE ---- Section 1. TERMS OF THE REORGANIZATION 1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . . . . . 2 1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . 4 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . . 9 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . . 12 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . . 13 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 13 Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 14 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . . 14 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . 14 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . . 14 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . 15 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 15 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . . . . . 15 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . 17 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . . . . 18 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . 19 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . . 20 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . . 21 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . . 22 14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.12 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.13 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.14 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.15 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.16 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and executed to be effective August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), MACK E. GREDER. D.D.S., P.C., a Nebraska professional corporation ("Company") and MACK GREDER, D.D.S., shareholder of Company (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Company operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, the Boards of Directors of the Company and Pentegra have determined that a reorganization between each of them is in the best interests of their respective companies; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Company, the "Target Companies") and simultaneously with the closing of the reorganization contemplated herein, intends to consummate its initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock"); WHEREAS, it is intended for Federal income tax purposes that the reorganization contemplated by this Agreement shall qualify as an reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. . NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE REORGANIZATION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 MERGER. Subject to and upon the terms and conditions contained herein, on the Closing Date, the Company shall be merged with and into Pentegra (or its designated affiliate, in which case, the references herein to Pentegra shall be to such designated affiliate and its shares of common stock) in accordance with this Agreement and the separate corporate existence of the Company shall thereupon cease ("Merger"). Pentegra shall be the surviving corporation in the Merger ("Surviving Corporation") and shall continue to be governed by the laws of the State of Delaware and the separate corporate existence of Pentegra with all rights, privileges, powers, immunities and purposes shall continue unaffected by the Merger. The Merger shall have the effects specified in the Delaware General Corporation Law and the Nebraska Business Corporation Law. If all the conditions to the Merger set forth herein shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated in accordance herewith, the parties hereto shall cause to be properly executed and filed on the Closing Date Certificates of Merger for the Company meeting the applicable legal requirements. The Mergers shall become effective on the Closing Date or the filing of such documents, in accordance with applicable law, or at such later time as the parties hereto have agreed upon and designated in such merger filings. 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation until duly amended in accordance with their terms. 1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra immediately prior to the effective date of the Merger shall be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. The persons who are officers of Pentegra immediately prior to the effective date of the Merger shall be the officers of the Surviving Corporation and shall hold their respective offices until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal. 1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and without any action on the part of the holder thereof, all shares of the Company's common stock issued and outstanding on the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired and shall cease to exist, and each holder of a certificate of representing shares of Company common stock shall thereafter cease to have any rights with respect to such shares except the right to receive the consideration set forth on ANNEX I attached hereto (the "Merger Consideration"). Each share of common stock of the Company held in treasury at the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired without payment of any consideration therefor. On the effective date of the Merger, each share of Pentegra Common Stock issued and outstanding shall, by virtue of the Mergers, and without any action on the part of the holder thereof, continue unchanged and remain outstanding as a share of validly issued, fully paid and nonassessable share of Surviving Corporation common stock. 1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger, the Shareholders, as the holders of a certificate or certificates representing shares of Company common stock shall, upon surrender of such certificate or certificates, receive the Merger Consideration, and until the certificate or certificates of Company common stock shall have been surrendered by the Shareholder and replaced by a certificate or certificates representing Pentegra Common Stock (as set forth on ANNEX I), the certificate or certificates of Company common stock shall, for all purposes be deemed to evidence ownership of the number of shares of Pentegra Common Stock determined in accordance with the provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the Shareholders in the Merger shall be deemed for all purposes to have been issued by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at Closing the certificate or certificates representing the Company common stock owned by them, duly endorsed in blank by the Shareholders, or accompanied by duly executed blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the Shareholder's expense, affixed and cancelled. 1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Company and Shareholders shall excecute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Nebraska. Company has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Company does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Company a party to any joint venture or partnership. The Shareholders are the sole shareholders of Company and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Company are owned by Company in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Company on any matter, (b) securities of Company convertible into equity interests in Company, or (c) commitments, options, rights or warrants to issue any such equity interests in Company, to issue securities of Company convertible into such equity interests, or to redeem any securities of Company. No shares of capital stock of Company have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Company's stockholders. Company is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Company does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Company has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Company and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Company and Shareholders, enforceable against Company and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Company or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Company or any Shareholder is a party or by which Company or any Shareholder is bound, or violate any material restrictions of any kind to which Company is subject, or result in any lien or encumbrance on any of Company's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Company and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Company or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Company on any of its capital stock since the Balance Sheet Date. No repurchase of any of Company's capital stock has been approved, effected or is pending, or is contemplated by Company. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Company and all amendments thereto have been delivered to Pentegra. The minute books of Company contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Company since its formation. The books of account of Company have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Company have been properly recorded in such books. 2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Company as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Company. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Company or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Company, as lessor or lessee, or any condition or event of which any Shareholder or Company has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Company or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Company and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Company, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Company has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Company, including the names of any entities from whom Company previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Company in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Company has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Company and the offices held by each, (b) the most recent payroll report of Company, showing all current employees of Company and their current levels of compensation, (c) promised increases in compensation of employees of Company that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Company is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Company is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Company has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Company, and Company has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the Business nor any of the Assets is subject to any pending, nor does Company or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Company, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Company and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Company or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Company has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Company ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Company or any Shareholder, or any condition or event of which Company or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Company and Shareholders have no knowledge of any default by any other party to such Contracts. Company and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Company or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Company on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Company since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Company; (o) Repurchased, approved any repurchase or agreed to repurchase any of Company's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Company has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Company has not received any notice that any tax deficiency or delinquency has been or may be asserted against Company. There are no audits relating to taxes of Company pending or in process or, to the knowledge of Company, threatened. Company is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Company. Company has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Company nor any predecessor of Company is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Company has delivered to Pentegra correct and complete copies of Company's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Company during the three calendar year period preceding the date of this Agreement. Company has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) No Shareholder presently intends to dispose of any of the shares of Pentegra Common Stock to be received hereunder nor is a party to any plan, arrangement or agreement for the disposition of such shares. Company and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Shareholders from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Company or Company's shareholders resulting from any action taken by Company or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Company or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Company (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed professional of Company carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Company have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Company, nor any Shareholder nor any licensed professional employee of Company has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Company has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company Plan," and collectively "Company Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Company has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Company Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Company Plans. Company has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Company Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Company, any Shareholder or any licensed professional employee of Company of any Federal, state or local law or regulation. Company and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Company. 2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed professional employee or independent contractor of Company has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Company, any Shareholder and each licensed professional employee of Company. Neither Company, nor any Shareholder, nor any licensed professional employee of Company has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Company, Shareholders and Company's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Company or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Company has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Company, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Company or any organization that has a material contract or arrangement with Company. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Company's services which accounted for more than 10% of revenues of Company in the preceding fiscal year. Company has good relations with all such payors and other material payors of Company and none of such payors has notified Company that it intends to discontinue its relationship with Company or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Company and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the reorganization contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the reorganization contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Company or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Company and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the Business and use the Assets in the ordinary course. Company and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Company and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Company and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Company. Company and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Company and Shareholdes shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Company, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Company, the Business or the Assets as Pentegra or its representatives may request. Company and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Company is a party or relating to the Business or the Assets, and (b) any adverse change in Company's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Company and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Company and Shareholders shall not, and shall use its best efforts to cause Company's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Company or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Company and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Company and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Company or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Company to any employee or other person or entity (including, without limitation, any Company Plan and any liability under employment contracts with Company) allocable to services performed prior to the Closing Date. Company and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Company's employees or similar persons or entities, including, without limitation, any Company Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Company shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Company, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Company, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Company, nor will any repurchase of any of Company's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the reorganization contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Company (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Company and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Company required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Company hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Company and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Company prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Company and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Company and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Company leases any of its premises from any Shareholder or other affiliate of Company or any shareholder of Company, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dentist employees of Company designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Company and Shareholders shall remain liable under any Company Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Company's employees incurred by Company prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Company and shall be treated as Clinic employees for purposes of eligibility and participation in Company Plans. 4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the practice of dentistry is conducted by the Shareholders and the Practice. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Shareholders shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. The Company shall have transferred the Excluded Assets set forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for equity interest in the Practice, and the Company shall have distributed such equity interests in the Practice to the Shareholders. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and have filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS. Pentegra, Shareholders and Company agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Company and Shareholders shall furnish all information concerning Company and Shareholders as may be reasonable requested in connection with any such action. Company and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Company and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Company and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Company and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Company and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Company, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Each Shareholder shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused each shareholder of Company that has an existing employment agreement with Company to have terminated his or her employment agreement with Company and shall have executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Company and Pentegra. 7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Company and its shareholders or affiliates and Company shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Company since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Company and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Company shall have received all documents, duly executed in form satisfactory to Company and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days after requested by Pentegra, Company and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Company authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) executed merger certificate and/or plan as required by applicable state law; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra and the original stock certificates together with blank stock powers representing the outstanding shares of Company common stock; (f) certificates of the Shareholders and a duly authorized officer of Company dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Company and Shareholder contained herein; (ii) as to the performance of and compliance by Company and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Company and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Company certifying as to the incumbency of the directors and officers of Company and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Company; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Company and any state of required foreign qualification of Company establishing that Company is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Company and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Company, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Company; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Company and Shareholders, the following, all of which shall be in a form satisfactory to counsel to Company and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Merger Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Company; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Company; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Company to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Company and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Company or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Company or any Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Company or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Company or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Company or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Company if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Company, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Company pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Company pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Each Shareholder covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Company resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Company and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Company or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Company and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Company and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Company and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Company and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement will qualify as a reorganization within the meaning of Section 368(a) of the Code. The tax returns (and schedules thereto) of Shareholders, Company and Pentegra shall be filed in a manner consistent with such intention and Shareholders and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Company and Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Company or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Company. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Company, be relieved from its obligations to Company under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Company, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Company and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Company or may demand from Company, and Company agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Companys or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. MACK E. GREDER, D.D.S., P.C. By: /s/ Mack E. Greder, D.D.S. ------------------------------------- Mack E. Greder, D.D.S., President PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman ------------------------------------- Its: Senior VP ------------------------------------- /s/ Mack E. Greder ---------------------------------------- Mack Greder, D.D.S. INDEX TO EXHIBITS
EXHIBIT DESCRIPTION ------- ----------- Annex I Merger Consideration A Target Companies 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 4.16 Excluded Assets and Excluded Liabilities 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(1) Form of Registration Rights Agreement 14.2 Addresses for Notice
EX-2.20 16 EXHIBIT 2.20 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., and SALVATORE J. GUARNIERI, D.D.S. TABLE OF CONTENTS
Page Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . .1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . .2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. 2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . .3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . .3 2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . .3 2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . .3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . .3 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . .3 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . .4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . .6 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . .6 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . .7 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . .7 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . .8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . .8 3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . .8 3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . .8 Section 4. COVENANTS OF DENTIST. 4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . .9 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . .9 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . .9 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . .9 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . 10 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 10 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 10 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . . . . 10 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 11 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 11 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 11 Section 6. COVENANTS OF PENTEGRA AND DENTIST 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 12 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 12 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 12 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 12 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 8. DENTIST'S CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 13 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . . . . . . 16 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 17 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 18 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 19 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . 20 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . 21 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . 21 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . 21 14.12 NO RULE OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . 21 14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.15 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.16 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra") and SALVATORE J. GUARNIERI, D.D.S. ("Dentist"). WITNESSETH: WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires to receive from Dentist, certain assets of Dentist; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Dentist, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. . NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P. or in such other manner as is mutually agreed upon by the parties, on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Dentist shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Dentist's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Dentist shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Dentist contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Dentist the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Dentist, including, but not limited to, liabilities arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by Dentist which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Dentist reflected on the books of Dentist at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Dentist, any licensed professional employee or independent contractor of Dentist, (vi) any liability for the payment of any taxes of Dentist, including without limitation, transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Dentist. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Dentist shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. Dentist hereby represents and warrants to Pentegra as follows: 2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the State of New York. Dentist does not have any assets, employees or offices relating to the Business in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Dentist and constitute or will constitute the legal, valid and binding obligations of Dentist in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Dentist is a party or by which Dentist is bound, or violate any material restrictions of any kind to which Dentist is subject, or result in any lien or encumbrance on any of the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Dentist, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Dentist. 2.5 [INTENTIONALLY DELETED]. 2.6 [INTENTIONALLY DELETED]. 2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for the Business for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of the Business as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Dentist relating to the Business. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Dentist leases, as lessor or lessee, real or personal property used in operating the Business or related to the Assets. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Dentist, as lessor or lessee, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Dentist has not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Dentist has no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Dentist, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Dentist has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items which are used by the Dentist in the Business. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Dentist relating to the business of dentistry, including the names of any entities from whom Dentist previously acquired significant assets related to the business of dentistry. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Dentist in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Dentist has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the most recent payroll report of Dentist, showing all current employees of Dentist relating to the Business or the practice of dentistry and their current levels of compensation, (b) promised increases in compensation of employees of Dentist relating to the Business or the practice of dentistry that have not yet been effected, (c) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Dentist is a party and which relate to the Business, copies of which have been delivered to Pentegra, and (d) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Dentist is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Dentist has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Dentist, and Dentist has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the Assets is subject to any pending, nor does Dentist have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Dentist, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Dentist, no basis for any such action exists, nor is there any legal impediment of which Dentist has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Dentist ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Dentist, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default by Dentist. Dentist has no knowledge of any default by any other party to such Contracts. Dentist has not received notice of the intention of any party to any Contract to cancel or terminate any Contract and has no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party to any material written or oral agreement, contract, lease or arrangement relating to the Assets or the Business, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Dentist, oral or written, that provide for prepayments or deferred installment payments (other than in the ordinary course of business consistent with past practices); or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Dentist on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist has not, since the Balance Sheet Date and in connection with the Business: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (d) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (e) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Dentist since the Balance Sheet Date; (f) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (g) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (h) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (i) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (j) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (k) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting the Business or the Assets, or experienced any other material adverse change in the financial condition, assets, prospects, liabilities or business of the Business; or (l) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Dentist has not received any notice that any tax deficiency or delinquency has been or may be asserted against Dentist. There are no audits relating to taxes of Dentist pending or in process or, to the knowledge of Dentist, threatened. Dentist is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the Assets. Dentist has withheld and paid all taxes required by law to have been withheld and paid by it. Dentist is not and has not been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Dentist has delivered to Pentegra correct and complete copies of Dentist's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Dentist during the three calendar year period preceding the date of this Agreement. Dentist has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Dentist does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Nothing contained herein shall prohibit Dentist from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Dentist resulting from any action taken by Dentist or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet or as set forth on EXHIBIT 2.19, Dentist did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature related to the Business, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business of the Business. Dentist does not know, or have reasonable grounds to know, of any basis for the assertion against Dentist as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Dentist related to the Business (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is included on the Balance Sheet or is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Dentist has not received notice or other communication from the issuer of any such insurance policy canceling or amending such policy or threatening to do so. Neither Dentist nor any licensed professional employee of Dentist has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Dentist has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Dentist has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Dentist Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Dentist Plans. Dentist has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Dentist Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Dentist or any licensed professional employee of Dentist of any Federal, state or local law or regulation. Dentist has not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Dentist. 2.24 THIRD PARTY PAYORS. Dentist and each licensed professional employee or independent contractor of Dentist has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Dentist and each licensed professional employee of Dentist. Neither Dentist nor any licensed professional employee of Dentist has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Dentist and Dentist's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by Dentist or to be furnished by Dentist to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Dentist has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or family member of Dentist, or their respective spouses, children or affiliates, and to the best of Dentist's knowledge, no employee of dentist, or such employee's respective spouse, childrenor affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of the Business or any organization that has a material contract or arrangement with Dentist relating to the Business. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Dentist's services which accounted for more than 10% of revenues of the Business in the preceding fiscal year. Dentist has good relations with all such payors and other material payors of the Business and none of such payors has notified Dentist that it intends to discontinue its relationship with Dentist or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Dentist as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Pentegra or waivers thereof in all jurisdictions where Pentegra is or will perform services, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF DENTIST. Dentist agrees that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Dentist agrees to complete the Exhibits hereto to be provided by him in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the Assets in the ordinary course. Dentist shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Dentist shall use his best efforts to preserve the Business and Assets intact and shall not take any action that would have a material adverse effect on the Business or Assets. Dentist shall use his best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Dentist. Dentist shall collect its receivables and pay its trade payables in the ordinary course of business. Dentist shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Dentist as the same relates to the Business or the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the Business or the Assets, as Pentegra or its representatives may request. Dentist shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Dentist is a party or relating to the Business or the Assets, and (b) any adverse change in Dentist's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall use his best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Dentist shall not, and shall use its best efforts to cause Dentist's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to the Dentist, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Dentist or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Dentist will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Dentist shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Dentist or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Dentist to any employee or other person or entity (including, without limitation, any Dentist Plan and any liability under employment contracts with Dentist) allocable to services performed prior to the Closing Date. Dentist acknowledges that the purpose and intent of this covenant is to assure that Pentegra shall have no liability whatsoever at any time after the Closing Date with respect to any of Dentist's employees or similar persons or entities, including, without limitation any Dentist Plan, for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of the Dentist (other than in the ordinary course of business) or other employee or an independent contractor of Dentist, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Dentist, the Business or the Assets. 4.8 [INTENTIONALLY OMITTED]. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material respect the tax or financial accounting methods or practices followed by Dentist (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Dentist will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Dentist required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Dentist covenants and agrees that all of the creditors with respect to the Business and the Assets will be paid in full by Dentist prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Dentist may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Dentist agrees to indemnify Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Dentist leases any of its premises from the Dentist or other affiliate of Dentist, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Dentist designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Dentist shall remain liable under any Dentist Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Dentist's employees incurred by Dentist prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and shall be treated as Clinic employees for purposes of eligibility and participation in Dentist Plans. 4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the Dentist and the Practice are to practice dentistry. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Dentist shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall qualify to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance reasonably satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and has filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND DENTIST. Pentegra and Dentist agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, at its sole cost and expense, shall promptly prepare and file with the Securities and Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra, at its sole cost and expense, shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Dentist shall furnish all information concerning Dentist as may be reasonable requested in connection with any such action. Dentist represents and warrants that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any mateial fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Dentist shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Dentist shall furnish Pentegra will all information concerning itself and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. 6.2 SALES TAX. Notwithstanding any provision herein to the contrary, Pentegra hereby covenants and agrees to pay any and all sales and/or use taxes due and owing as a result of the transactions contemplated by this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Dentist contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Dentist prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of the Business or Assets shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Dentist shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Dentist shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her employment agreement and executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra. 7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Dentist and its affiliates relating to the Business or Assets, and Dentist shall not have any liabilities relating to the Business, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured on its liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Dentist since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act (the "Effective Date") and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. DENTIST'S CONDITIONS PRECEDENT. The obligations of Dentist hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly executed in form satisfactory to Dentist and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF DENTIST. Within five business days after requested by Pentegra, Dentist shall deliver to Pentegra the following, all of which shall be in a form reasonably satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a bill of sale conveying the Assets to Pentegra; (d) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (e) certificates of Dentist dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Dentist contained herein; (ii) as to the performance of and compliance by Dentist with all covenants contained herein; and (iii) certifying that all conditions precedent of Dentist to the Closing have been satisfied; (f) an opinion of counsel to Dentist opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Dentist, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (g) non-foreign affidavits executed by Dentist; (h) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (i) an executed Registration Rights Agreement between Pentegra and Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (j) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Dentist the following, all of which shall be in a form reasonably satisfactory to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Dentist; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Dentist; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Dentist to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Dentist or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of three (3) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS PRIOR TO THE CLOSING DATE, (C) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES (OTHER THAN PENTEGRA) OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (D) TAXES (OTHER THAN SALES AND USE TAXES) OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (E) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (F) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (G) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (H) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS COUNSEL IN WRITING BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. Except with respect to the failure of Pentegra to satisfy the payment of the Acquisition Consideration, the parties hereto hereby acknowledge and agree that the indemnification rights of the parties under this Section 10 and equitable remedies, including without limitation, injunctive relief, represent the sole and exclusive remedies that the parties hereto have with respect to the breach of any representation, warranty or covenant set forth in this Agreement. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Dentist giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. In the event of any breach of warranty, representation, covenant or agreement by Pentegra giving rise to indemnification under Section 10.2 or 10.4 hereof, Dentist shall be entitled to offset the amount of damages actually incurred by it as a result of such breach of a warranty, representation or covenant or agreement against any amounts payable by Dentist or the Prractice, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Dentist contained in this Agreement or in any certificate or other document executed and delivered by Dentist pursuant to this Agreement is or becomes untrue or breached in any material respect or if Dentist fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Dentist if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra or Dentist if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Dentist, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Dentist pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the shares of Pentegra Common Stock to be delivered to Dentist pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933, and may not be resold without compliance with the Securities Act of 1933, as amended or an exemption thereunder. The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Dentist covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Dentist resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect its own interests in connection with the acquisition of the Pentegra Common Stock. Dentist and its representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Dentist and its representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Dentist is an "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes and acknowledges that it had in the past, currently has, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Dentist agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Dentist, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Dentist shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto, at their sole cost and expense, with the opportunity to contest such disclosure, (iii) Dentist reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Dentist is the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Dentist from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Dentist and Pentegra shall be filed in a manner consistent with such intention and Dentist and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Dentist: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.13, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Dentist for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Dentist. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Dentist, be relieved from its obligations to Dentist under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Dentist, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a pro rata portion of all taxes (other than sales and use taxes) levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman -------------------------------------- Its: Senior Vice President -------------------------------------- /s/ Salvatore J. Guarnieri, D.D.S. ------------------------------------ Salvatore J. Guarnieri, D.D.S. INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 [intentionally omitted] 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.21 17 EXHIBIT 2.21 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., KENT M. HAMILTON, D.D.S., P.C. AND KENT M. HAMILTON, D.D.S. TABLE OF CONTENTS Page ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . 3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . 8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . .10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . .10 Section 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . .10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . .10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . .10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . .10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . .10 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . .11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . .11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . .11 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . .11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . .11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . .11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . .12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . .12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . .12 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . .12 Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . .12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . .13 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . .13 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . .13 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . .13 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . .13 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . .13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . .13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . .13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . .13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . .13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . .13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . .14 Section 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . .14 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . .14 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . .14 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . .14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . . . .14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . .15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . .16 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . .16 10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS . . . . . . . . . . .17 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . .18 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . .18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . .19 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . .19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . .20 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . .21 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . .21 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . .21 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . .21 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . .21 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . .22 14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . .22 14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . .22 14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), Kent M. Hamilton, D.D.S., P.C. ("Contributor") and Kent M. Hamilton, D.D.S., shareholders of Contributor (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Contributor operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra desires to receive from Contributor, certain assets of Contributor; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Contributor, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Contributor shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Contributor's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Contributor shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Contributor contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Contributor the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Contributor listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Contributor, including, but not limited to, liabilities arising under any Contributor Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by any Shareholder or Contributor, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Contributor reflected on the books of Contributor at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Contributor, any licensed professional employee or independent contractor of Contributor or any Shareholder, (vi) any liability for the payment of any taxes of Contributor or any Shareholder, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Contributor or any Shareholder. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, Contributor and Shareholders shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS. Contributor and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Contributor is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Texas. Contributor has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Contributor does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Contributor a party to any joint venture or partnership. The Shareholders are the sole shareholders of Contributor and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Contributor's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Contributor are owned by Contributor in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Contributor on any matter, (b) securities of Contributor convertible into equity interests in Contributor, or (c) commitments, options, rights or warrants to issue any such equity interests in Contributor, to issue securities of Contributor convertible into such equity interests, or to redeem any securities of Contributor. No shares of capital stock of Contributor have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Contributor's stockholders. Contributor is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Contributor does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Contributor has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Contributor and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Contributor and Shareholders, enforceable against Contributor and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Contributor or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Contributor or any Shareholder is a party or by which Contributor or any Shareholder is bound, or violate any material restrictions of any kind to which Contributor is subject, or result in any lien or encumbrance on any of Contributor's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Contributor and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Contributor or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Contributor on any of its capital stock since the Balance Sheet Date. No repurchase of any of Contributor's capital stock has been approved, effected or is pending, or is contemplated by Contributor. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Contributor and all amendments thereto have been delivered to Pentegra. The minute books of Contributor contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Contributor since its formation. The books of account of Contributor have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Contributor have been properly recorded in such books. 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Contributor as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Contributor. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Contributor or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Contributor, as lessor or lessee, or any condition or event of which any Shareholder or Contributor has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Contributor or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Contributor and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Contributor, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Contributor has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Contributor, including the names of any entities from whom Contributor previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Contributor is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Contributor in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Contributor has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Contributor and the offices held by each, (b) the most recent payroll report of Contributor, showing all current employees of Contributor and their current levels of compensation, (c) promised increases in compensation of employees of Contributor that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Contributor is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Contributor is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Contributor has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Contributor, and Contributor has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Contributor nor the Business nor any of the Assets is subject to any pending, nor does Contributor or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Contributor, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Contributor and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Contributor or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Contributor ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Contributor or any Shareholder, or any condition or event of which Contributor or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Contributor and Shareholders have no knowledge of any default by any other party to such Contracts. Contributor and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Contributor are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Contributor or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Contributor on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Contributor has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Contributor since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Contributor; (o) Repurchased, approved any repurchase or agreed to repurchase any of Contributor's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Contributor has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Contributor has not received any notice that any tax deficiency or delinquency has been or may be asserted against Contributor. There are no audits relating to taxes of Contributor pending or in process or, to the knowledge of Contributor, threatened. Contributor is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Contributor. Contributor has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Contributor nor any predecessor of Contributor is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Contributor has delivered to Pentegra correct and complete copies of Contributor's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Contributor during the three calendar year period preceding the date of this Agreement. Contributor has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Contributor does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Contributor and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Contributor from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Contributor or Contributor's shareholders resulting from any action taken by Contributor or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Contributor did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Contributor and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Contributor or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Contributor (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Contributor, each Shareholder and each licensed professional of Contributor carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Contributor have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Contributor, nor any Shareholder nor any licensed professional employee of Contributor has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Contributor has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Contributor Plan," and collectively "Contributor Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Contributor has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Contributor Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Contributor Plans. Contributor has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Contributor Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Shareholders and Contributor's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Contributor, any Shareholder or any licensed professional employee of Contributor of any Federal, state or local law or regulation. Contributor and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Contributor. 2.24 THIRD PARTY PAYORS. Contributor, Shareholders and each licensed professional employee or independent contractor of Contributor has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Contributor, any Shareholder and each licensed professional employee of Contributor. Neither Contributor, nor any Shareholder, nor any licensed professional employee of Contributor has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Contributor, Shareholders and Contributor's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Contributor or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Contributor or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Contributor has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Contributor, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Contributor or any organization that has a material contract or arrangement with Contributor. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Contributor's services which accounted for more than 10% of revenues of Contributor in the preceding fiscal year. Contributor has good relations with all such payors and other material payors of Contributor and none of such payors has notified Contributor that it intends to discontinue its relationship with Contributor or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Contributor and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Pentegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Contributor or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS. Contributor and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Contributor and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Contributor and Shareholders shall operate the Business and use the Assets in the ordinary course. Contributor and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Contributor and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Contributor and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Contributor. Contributor and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Contributor and Shareholders shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Contributor and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Contributor, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Contributor, the Business or the Assets as Pentegra or its representatives may request. Contributor and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Contributor is a party or relating to the Business or the Assets, and (b) any adverse change in Contributor's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Contributor and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of Contributor contemplated by the Service Agreement and to conduct the intended business of Contributor and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Contributor and Shareholders shall not, and shall use its best efforts to cause Contributor's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Contributor or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Contributor and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Contributor and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Contributor or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Contributor to any employee or other person or entity (including, without limitation, any Contributor Plan and any liability under employment contracts with Contributor) allocable to services performed prior to the Closing Date. Contributor and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Contributor's employees or similar persons or entities, including, without limitation, any Contributor Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Contributor, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Contributor, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Contributor, nor will any repurchase of any of Contributor's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Contributor and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Contributor (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Contributor and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Contributor required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Contributor hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Contributor and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Contributor prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Contributor and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Contributor and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Contributor and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Contributor leases any of its premises from any Shareholder or other affiliate of Contributor or any shareholder of Contributor, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Contributor and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Contributor designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Contributor and Shareholders shall remain liable under any Contributor Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Contributor's employees incurred by Contributor prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that all employees of Contributor hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Contributor and shall be treated as Clinic employees for purposes of eligibility and participation in Contributor Plans. 4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS. Pentegra, Shareholders and Contributor agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Contributor and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Contributor and Shareholders shall furnish all information concerning Contributor and Shareholders as may be reasonable requested in connection with any such action. Contributor and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Contributor and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Contributor and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Contributor and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Contributor and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Contributor and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Contributor, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Contributor. Each Shareholder shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of Contributor under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and caused each shareholder of Contributor that has an existing employment agreement with Contributor to have terminated his or her employment agreement with Contributor and shall have executed an employment agreement ("Employment Agreement") with Contributor in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Contributor and Pentegra. 7.9 CONSENTS AND APPROVALS. Contributor and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Contributor and its shareholders or affiliates and Contributor shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Contributor and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Contributor since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC on or before December 31, 1997. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Contributor and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Contributor shall have received all documents, duly executed in form satisfactory to Contributor and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. Within five business days after requested by Pentegra, Contributor and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Contributor authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) a bill of sale conveying the Assets to Pentegra; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (f) certificates of the Shareholders and a duly authorized officer of Contributor dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Contributor and Shareholder contained herein; (ii) as to the performance of and compliance by Contributor and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Contributor and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Contributor certifying as to the incumbency of the directors and officers of Contributor and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Contributor; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Contributor and any state of required foreign qualification of Contributor establishing that Contributor is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Contributor and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Contributor, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Contributor; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Contributor, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Contributor and Shareholder, the following, all of which shall be in a form satisfactory to counsel to Contributor and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Contributor; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Contributor; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Contributor to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Contributor and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD CONTRIBUTOR AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING CONTRIBUTOR AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS, OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. CONTRIBUTOR AND SHAREHOLDERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY CONTRIBUTOR OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE CONTRIBUTOR OR SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF CONTRIBUTOR OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF CONTRIBUTOR OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE CONTRIBUTOR OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Contributor or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. In the event of any breach of warranty, representation, covenant or agreement by Pentegra giving rise to indemnification under SECTION 10.2 or SECTION 10.4 hereof, Dentist shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Dentist, including amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Contributor or Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Contributor or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Contributor or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Contributor or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Contributor if the transaction contemplated (including the Initial Public Offering) hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Contributor, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Contributor shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Contributor pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Contributor pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Contributor pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Contributor covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Contributor resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Contributor, Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Contributor, Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Contributor and Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Contributor and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Contributor or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Contributor and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Contributor and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Contributor and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Contributor or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Contributor and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Shareholders, Contributor and Pentegra shall be filed in a manner consistent with such intention and Contributor and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Contributor or Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Contributor or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Contributor. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF CONTRIBUTOR AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Contributor, be relieved from its obligations to Contributor under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Contributor, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Contributor and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Contributor or may demand from Contributor, and Contributor agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Contributors or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoenix, Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. Kent M. Hamilton, D.D.S., P.C. By: /s/ Kent M. Hamilton, D.D.S. -------------------------------------------------- Its: President ------------------------------------------------- PENTEGRA DENTAL GROUP, INC. By: /s/ James L. Dunn, Jr. -------------------------------------------------- Its: Senior Vice President ------------------------------------------------- /s/ Kent M. Hamilton, D.D.S. ----------------------------------------------------- Kent M. Hamilton, D.D.S. INDEX TO EXHIBITS EXHIBIT DESCRIPTION ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice 469 EX-2.22 18 EXHIBIT 2.22 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., and DAVID R. HENDERSON, D.D.S. TABLE OF CONTENTS Page ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. 2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . 2 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 3 2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 3 2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . 3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . 3 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . 3 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . 3 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . 6 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . 6 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . 6 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . 6 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . 7 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . 7 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . 7 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . 7 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . 7 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . 8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . 8 3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . 8 3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . 8 3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . 8 Section 4. COVENANTS OF DENTIST. 4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . 9 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . 9 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . 9 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . 9 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . 9 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . 9 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 9 4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . 10 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . 10 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . 10 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . 10 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . 10 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . 10 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . 10 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . 11 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . 11 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . 11 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . 11 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . 11 Section 6. COVENANTS OF PENTEGRA AND DENTIST 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . 12 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . 12 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . 12 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . 12 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . 12 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . 13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . 13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . 13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . 13 Section 8. DENTIST'S CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . 13 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . 13 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . 13 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . 15 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . 16 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . 17 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . 18 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . 19 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . 19 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . 20 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . 20 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . 20 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . 21 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . 21 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . 21 14.12 NO RULE OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . 21 14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . 21 14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.15 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . 21 14.16 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . 23 ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed effective August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra") and DAVID R. HENDERSON, D.D.S. ("Dentist"). WITNESSETH: WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires to receive from Dentist, certain assets of Dentist; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Dentist, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Dentist shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Dentist's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Dentist shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Dentist contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Dentist the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Dentist, including, but not limited to, liabilities arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by Dentist, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Dentist reflected on the books of Dentist at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Dentist, any licensed professional employee or independent contractor of Dentist, (vi) any liability for the payment of any taxes of Dentist, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Dentist. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Dentist shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. Dentist hereby represents and warrants to Pentegra as follows: 2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the State of Arizona. Dentist does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Dentist and constitute or will constitute the legal, valid and binding obligations of Dentist in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Dentist is a party or by which Dentist is bound, or violate any material restrictions of any kind to which Dentist is subject, or result in any lien or encumbrance on any of Dentist's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Dentist, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Dentist. 2.5 [INTENTIONALLY DELETED]. 2.6 [INTENTIONALLY DELETED]. 2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Dentist as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Dentist. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Dentist leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Dentist, as lessor or lessee, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Dentist has not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Dentist has no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Dentist, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Dentist has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Dentist, including the names of any entities from whom Dentist previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Dentist in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Dentist has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the most recent payroll report of Dentist, showing all current employees of Dentist and their current levels of compensation, (b) promised increases in compensation of employees of Dentist that have not yet been effected, (c) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Dentist is a party, copies of which have been delivered to Pentegra, and (d) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Dentist is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Dentist has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Dentist, and Dentist has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Other than as set forth on EXHIBIT 2.14, neither Dentist nor the Business nor any of the Assets is subject to any pending, nor does Dentist have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Dentist, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Dentist, no basis for any such action exists, nor is there any legal impediment of which Dentist has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Dentist ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Dentist, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default. Dentist has no knowledge of any default by any other party to such Contracts. Dentist has not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Dentist, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Dentist on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (d) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (e) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Dentist since the Balance Sheet Date; (f) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (g) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (h) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (i) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (j) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (k) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; or (l) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Other than as set forth on EXHIBIT 2.17, Dentist has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Dentist has not received any notice that any tax deficiency or delinquency has been or may be asserted against Dentist. There are no audits relating to taxes of Dentist pending or in process or, to the knowledge of Dentist, threatened. Dentist is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Dentist. Dentist has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Dentist nor any predecessor of Dentist is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Dentist has delivered to Pentegra correct and complete copies of Dentist's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Dentist during the three calendar year period preceding the date of this Agreement. Dentist has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Dentist does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Nothing contained herein shall prohibit Dentist from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Dentist resulting from any action taken by Dentist or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Dentist does not know, or have reasonable grounds to know, of any basis for the assertion against Dentist as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Dentist (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Dentist has not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Dentist nor any licensed professional employee of Dentist has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Dentist has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Dentist has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Dentist Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Dentist Plans. Dentist has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Dentist Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Dentist or any licensed professional employee of Dentist of any Federal, state or local law or regulation. Dentist has not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Dentist. 2.24 THIRD PARTY PAYORS. Dentist and each licensed professional employee or independent contractor of Dentist has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Dentist and each licensed professional employee of Dentist. Neither Dentist nor any licensed professional employee of Dentist has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Dentist and Dentist's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by Dentist or to be furnished by Dentist to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Dentist has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. Other than as set forth on EXHIBIT 2.17, no officer or employee or family member of Dentist, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Dentist or any organization that has a material contract or arrangement with Dentist. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Dentist's services which accounted for more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has good relations with all such payors and other material payors of Dentist and none of such payors has notified Dentist that it intends to discontinue its relationship with Dentist or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Dentist as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF DENTIST. Dentist agrees that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Dentist agrees to complete the Exhibits hereto to be provided by him in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the Assets in the ordinary course. Dentist shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Dentist shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Dentist shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Dentist. Dentist shall collect its receivables and pay its trade payables in the ordinary course of business. Dentist shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Dentist, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Dentist, the Business or the Assets as Pentegra or its representatives may request. Dentist shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Dentist is a party or relating to the Business or the Assets, and (b) any adverse change in Dentist's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall use his best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Dentist shall not, and shall use its best efforts to cause Dentist's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to the Dentist, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Dentist or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Dentist will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Dentist shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Dentist or any entity might have any liability whatsoever arising from any insurance, pension plan. employment tax or similar liability of Dentist to any employee or other person or entity (including, without limitation, any Dentist Plan and any liability under employment contracts with Dentist) allocable to services performed prior to the Closing Date. Dentist acknowledges that the purpose and intent of this covenant is to assure that Pentegra shall have no liability whatsoever at any time after the Closing Date with respect to any of Dentist's employees or similar persons or entities, including, without limitation, any Dentist Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of the Dentist (other than in the ordinary course of business) or other employee (other than in the ordinary course of business) or an independent contractor of Dentist, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Dentist, its business, assets or prospects. 4.8 [INTENTIONALLY OMITTED]. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material respect the tax or financial accounting methods or practices followed by Dentist (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Dentist will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Dentist required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Dentist covenants and agrees that all of the creditors with respect to the Business and the Assets will be paid in full by Dentist prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Dentist may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Dentist agrees to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Dentist leases any of its premises from the Dentist or other affiliate of Dentist, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Dentist designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Dentist shall remain liable under any Dentist Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Dentist's employees incurred by Dentist prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and shall be treated as Clinic employees for purposes of eligibility and participation in Dentist Plans. 4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the Dentist and the Practice are to practice dentistry. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Dentist shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of thePractice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and has filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND DENTIST. Pentegra and Dentist agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Dentist shall furnish all information concerning Dentist as may be reasonably requested in connection with any such action. Dentist represents and warrants that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Dentist shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Dentist shall furnish Pentegra will all information concerning itself and such other matters as may be reasonably requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Dentist contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Dentist prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Dentist, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Dentist shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Dentist shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her employment agreement and executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra. 7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Dentist and its affiliates and Dentist shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured on irs liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Dentist since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq National Market or other exchange with equal or higher listing standards selected by Pentegra, subject only to official notification of issuance. SECTION 8. DENTIST'S CONDITIONS PRECEDENT. The obligations of Dentist hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly executed in form satisfactory to Dentist and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq National Market or other exchange of equal or higher listing standards selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF DENTIST. Within five business days after requested by Pentegra, Dentist shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a bill of sale conveying the Assets to Pentegra; (d) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (e) certificates of Dentist dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Dentist contained herein; (ii) as to the performance of and compliance by Dentist with all covenants contained herein; and (iii) certifying that all conditions precedent of Dentist to the Closing have been satisfied; (f) an opinion of counsel to Dentist opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Dentist, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (g) non-foreign affidavits executed by Dentist; (h) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (i) an executed Registration Rights Agreement between Pentegra and Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (j) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Dentist the following, all of which shall be in a form satisfactory to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Dentist; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Dentist; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Dentist to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Dentist or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL PAY ON BEHALF OF INDEMNITEE ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL PAY ON BEHALF OF INDEMNITEE ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Dentist giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Dentist contained in this Agreement or in any certificate or other document executed and delivered by Dentist pursuant to this Agreement is or becomes untrue or breached in any material respect or if Dentist fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Dentist if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra or Dentist if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Dentist, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Dentist pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the shares of Pentegra Common Stock to be delivered to Dentist pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Dentist covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Dentist resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect its own interests in connection with the acquisition of the Pentegra Common Stock. Dentist and its representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Dentist and its representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Dentist is an "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes and acknowledges that it had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Dentist agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Dentist, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Dentist shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Dentist reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Dentist is the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Dentist from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Dentist and Pentegra shall be filed in a manner consistent with such intention and Dentist and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Dentist: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Dentist for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Dentist. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Dentist, be relieved from its obligations to Dentist under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Dentist, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman ---------------------------------------- Its: Senior Vice President ---------------------------------------- /s/ David R. Henderson, D.D.S. -------------------------------------- David R. Henderson, D.D.S. INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 [intentionally omitted] 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Payroll Information; Employment Agreements 2.14 Legal Proceedings 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.17 Taxes 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.27 Ownership Interests of Family Members 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.23 19 EXHIBIT 2.23 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., and STEPHEN HWANG, D.D.S. TABLE OF CONTENTS
Page ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. 2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 3 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 3 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 7 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 7 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 8 3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 4. COVENANTS OF DENTIST. 4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 9 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 9 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 9 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . 10 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 10 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 10 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . . . . 10 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 11 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 11 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 11 Section 6. COVENANTS OF PENTEGRA AND DENTIST 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 12 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 12 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 12 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 12 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 8. DENTIST'S CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 13 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . . . . . . 16 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 17 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 18 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 19 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . 20 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . 21 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . 21 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . 21 14.12 NO RULE OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . 21 14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.15 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.16 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra") and STEPHEN HWANG, D.D.S. ("Dentist"). WITNESSETH: WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires to receive from Dentist, certain assets of Dentist; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Dentist, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Dentist shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Dentist's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Dentist shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Dentist contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Dentist the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Dentist, including, but not limited to, liabilities arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by Dentist, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Dentist reflected on the books of Dentist at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Dentist, any licensed professional employee or independent contractor of Dentist, (vi) any liability for the payment of any taxes of Dentist, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Dentist. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Dentist shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. Dentist hereby represents and warrants to Pentegra as follows: 2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the State of Florida. Dentist does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Dentist and constitute or will constitute the legal, valid and binding obligations of Dentist in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Dentist is a party or by which Dentist is bound, or violate any material restrictions of any kind to which Dentist is subject, or result in any lien or encumbrance on any of Dentist's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Dentist, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Dentist. 2.5 [INTENTIONALLY DELETED]. 2.6 [INTENTIONALLY DELETED]. 2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Dentist as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Dentist. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Dentist leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Dentist, as lessor or lessee, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Dentist has not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Dentist has no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Dentist, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Dentist has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Dentist, including the names of any entities from whom Dentist previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Dentist in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Dentist has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the most recent payroll report of Dentist, showing all current employees of Dentist and their current levels of compensation, (b) promised increases in compensation of employees of Dentist that have not yet been effected, (c) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Dentist is a party, copies of which have been delivered to Pentegra, and (d) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Dentist is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Dentist has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Dentist, and Dentist has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the Assets is subject to any pending, nor does Dentist have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Dentist, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Dentist, no basis for any such action exists, nor is there any legal impediment of which Dentist has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Dentist ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Dentist, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default. Dentist has no knowledge of any default by any other party to such Contracts. Dentist has not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Dentist, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Dentist on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (d) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (e) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Dentist since the Balance Sheet Date; (f) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (g) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (h) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (i) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (j) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (k) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; or (l) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Dentist has not received any notice that any tax deficiency or delinquency has been or may be asserted against Dentist. There are no audits relating to taxes of Dentist pending or in process or, to the knowledge of Dentist, threatened. Dentist is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Dentist. Dentist has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Dentist nor any predecessor of Dentist is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Dentist has delivered to Pentegra correct and complete copies of Dentist's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Dentist during the three calendar year period preceding the date of this Agreement. Dentist has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Dentist does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Nothing contained herein shall prohibit Dentist from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Dentist resulting from any action taken by Dentist or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Dentist does not know, or have reasonable grounds to know, of any basis for the assertion against Dentist as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Dentist (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Dentist has not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Dentist nor any licensed professional employee of Dentist has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Dentist has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Dentist has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Dentist Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Dentist Plans. Dentist has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Dentist Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Dentist or any licensed professional employee of Dentist of any Federal, state or local law or regulation. Dentist has not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Dentist. 2.24 THIRD PARTY PAYORS. Dentist and each licensed professional employee or independent contractor of Dentist has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Dentist and each licensed professional employee of Dentist. Neither Dentist nor any licensed professional employee of Dentist has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Dentist and Dentist's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by Dentist or to be furnished by Dentist to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Dentist has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or employee or family member of Dentist, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Dentist or any organization that has a material contract or arrangement with Dentist. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Dentist's services which accounted for more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has good relations with all such payors and other material payors of Dentist and none of such payors has notified Dentist that it intends to discontinue its relationship with Dentist or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Dentist as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF DENTIST. Dentist agrees that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Dentist agrees to complete the Exhibits hereto to be provided by him in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the Assets in the ordinary course. Dentist shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Dentist shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Dentist shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Dentist. Dentist shall collect its receivables and pay its trade payables in the ordinary course of business. Dentist shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Dentist, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Dentist, the Business or the Assets as Pentegra or its representatives may request. Dentist shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Dentist is a party or relating to the Business or the Assets, and (b) any adverse change in Dentist's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall use his best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Dentist shall not, and shall use its best efforts to cause Dentist's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to the Dentist, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Dentist or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Dentist will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Dentist shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Dentist or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Dentist to any employee or other person or entity (including, without limitation, any Dentist Plan and any liability under employment contracts with Dentist) allocable to services performed prior to the Closing Date. Dentist acknowledges that the purpose and intent of this covenant is to assure that Pentegra shall have no liability whatsoever at any time after the Closing Date with respect to any of Dentist's employees or similar persons or entities, including, without limitation, any Dentist Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of the Dentist (other than in the ordinary course of business) or other employee or an independent contractor of Dentist, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Dentist, its business, assets or prospects. 4.8 [INTENTIONALLY OMITTED]. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material respect the tax or financial accounting methods or practices followed by Dentist (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Dentist will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Dentist required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Dentist covenants and agrees that all of the creditors with respect to the Business and the Assets will be paid in full by Dentist prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Dentist may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Dentist agrees to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Dentist leases any of its premises from the Dentist or other affiliate of Dentist, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Dentist designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Dentist shall remain liable under any Dentist Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Dentist's employees incurred by Dentist prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and shall be treated as Clinic employees for purposes of eligibility and participation in Dentist Plans. 4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the Dentist and the Practice are to practice dentistry. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Dentist shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of thePractice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and has filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND DENTIST. Pentegra and Dentist agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Dentist shall furnish all information concerning Dentist as may be reasonable requested in connection with any such action. Dentist represents and warrants that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Dentist shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Dentist shall furnish Pentegra will all information concerning itself and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Dentist contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Dentist prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Dentist, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Dentist shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Dentist shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her employment agreement and executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra. 7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Dentist and its affiliates and Dentist shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured on irs liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Dentist since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. DENTIST'S CONDITIONS PRECEDENT. The obligations of Dentist hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly executed in form satisfactory to Dentist and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF DENTIST. Within five business days after requested by Pentegra, Dentist shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreemen and security agreement referred to therein; (b) executed Employment Agreements; (c) a bill of sale conveying the Assets to Pentegra; (d) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (e) certificates of Dentist dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Dentist contained herein; (ii) as to the performance of and compliance by Dentist with all covenants contained herein; and (iii) certifying that all conditions precedent of Dentist to the Closing have been satisfied; (f) an opinion of counsel to Dentist opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Dentist, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (g) non-foreign affidavits executed by Dentist; (h) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (i) an executed Registration Rights Agreement between Pentegra and Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (j) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Dentist the following, all of which shall be in a form satisfactory to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Dentist; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Dentist; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Dentist to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Dentist or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Dentist giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Dentist contained in this Agreement or in any certificate or other document executed and delivered by Dentist pursuant to this Agreement is or becomes untrue or breached in any material respect or if Dentist fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Dentist if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra or Dentist if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Dentist, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Dentist pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the shares of Pentegra Common Stock to be delivered to Dentist pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Dentist covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Dentist resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect its own interests in connection with the acquisition of the Pentegra Common Stock. Dentist and its representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Dentist and its representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Dentist is an "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes and acknowledges that it had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Dentist agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Dentist, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Dentist shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Dentist reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Dentist is the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Dentist from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Dentist and Pentegra shall be filed in a manner consistent with such intention and Dentist and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Dentist: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Dentist for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Dentist. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Dentist, be relieved from its obligations to Dentist under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Dentist, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman ------------------------------ Its: Senior Vice President ----------------------------- /s/ Stephen Hwang, D.D.S. --------------------------------- Stephen Hwang, D.D.S. INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 [intentionally omitted] 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Encumbrances 2.12 Patents and Trademarks; Names 2.13 Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.24 20 EXHIBIT 2.24 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., JACKSON DENTAL PARTNERSHIP, and PENN JACKSON, SR. and PENN JACKSON, JR. TABLE OF CONTENTS
PAGE Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . .1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . .2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND PARTNERS. 2.1 EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . . . . . . .2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . .3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . .3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . .3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . .3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . .4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . .4 2.13 PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . .4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . .8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . .8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . .8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . .9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . .9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . .9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . .9 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF CONTRIBUTOR AND PARTNERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 10 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 12 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 12 Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND PARTNERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 12 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 13 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 13 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 8. CONTRIBUTOR'S AND PARTNERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 14 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 14 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF CONTRIBUTOR AND PARTNERS. . . . . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY CONTRIBUTOR AND PARTNERS . . . . . . . . . . . . . . . 17 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 18 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 19 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 19 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . 21 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . 21 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . 21 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . 21 14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), JACKSON DENTAL PARTNERSHIP, a Texas partnership ("Contributor") and PENN JACKSON, SR. and PENN JACKSON, JR., partners of Contributor (referred to herein as "Partner" or "Partners"). WITNESSETH: WHEREAS, Contributor operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra desires to receive from Contributor, certain assets of Contributor; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Contributor, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Contributor shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Contributor's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Contributor shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Contributor contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Contributor the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Contributor listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Contributor, including, but not limited to, liabilities arising under any Contributor Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by Contributor or any Partner, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Contributor reflected on the books of Contributor at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Contributor, any licensed professional employee or independent contractor of Contributor or any Partner, (vi) any liability for the payment of any taxes of Contributor or any Partner, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Contributor or any Partner. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, Contributor and Partners shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND PARTNERS. Contributor and Partners, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 EXISTENCE; GOOD STANDING. Contributor is a partnership duly organized, validly existing and in good standing under the laws of the State of Texas. Contributor has all necessary partnership power to own all of its assets and to carry on its business as such business is now being conducted. Contributor does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Contributor a party to any joint venture or partnership. The Partners are the sole partners of Contributor and own all outstanding partnership interests free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each partnreship interest of Contributor has been legally and validly issued and fully paid and nonassessable. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the partners of Contributor on any matter, (b) securities of Contributor convertible into equity interests in Contributor, or (c) commitments, options, rights or warrants to issue any such equity interests in Contributor, to issue securities of Contributor convertible into such equity interests, or to redeem any securities of Contributor. No partnership interests of Contributor have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Contributor's partners. Contributor is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Contributor does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the partnership power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Partnership Agreement or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Partner has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Contributor has obtained the approval of its partners necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Contributor and Partners, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Contributor and Partners, enforceable against Contributor and Partners in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Partnership Agreement of Contributor or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Contributor or any Partner is a party or by which Contributor or any Partner is bound, or violate any material restrictions of any kind to which Contributor is subject, or result in any lien or encumbrance on any of Contributor's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Contributor and Partners, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Contributor or Partners. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Contributor on any of its partnership interests since the Balance Sheet Date. No repurchase of any of Contributor's partnership interests has been approved, effected or is pending, or is contemplated by Contributor. 2.6 CORPORATE RECORDS. True and correct copies of the Partnership Agreement and minutes of Contributor and all amendments thereto have been delivered to Pentegra. The books of account of Contributor have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Contributor have been properly recorded in such books. 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Contributor as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Contributor. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Contributor or any Partner leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Contributor, as lessor or lessee, or any condition or event of which any Partner or Contributor has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Contributor or Partners have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Contributor and Partners have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Contributor, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Contributor has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Contributor, including the names of any entities from whom Contributor previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Contributor is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Contributor in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Contributor has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the most recent payroll report of Contributor, showing all current employees of Contributor and their current levels of compensation, (b) promised increases in compensation of employees of Contributor that have not yet been effected, (c) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Contributor is a party, copies of which have been delivered to Pentegra, and (d) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Contributor is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Contributor has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Contributor, and Contributor has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Partner, Contributor nor the Business nor any of the Assets is subject to any pending, nor does Contributor or any Partner have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Contributor, any Partner, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Contributor and Partners, no basis for any such action exists, nor is there any legal impediment of which Contributor or any Partner has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Contributor ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Contributor or any Partner, or any condition or event of which Contributor or any Partner has knowledge which with notice or lapse of time, or both, would constitute a default. Contributor and Partners have no knowledge of any default by any other party to such Contracts. Contributor and Partners have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Contributor are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any is: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of Contributor or Partners, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Contributor on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Contributor has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Contributor since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the equity interests of Contributor; (o) Repurchased, approved any repurchase or agreed to repurchase any of Contributor's partnership interests; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Contributor has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Contributor has not received any notice that any tax deficiency or delinquency has been or may be asserted against Contributor. There are no audits relating to taxes of Contributor pending or in process or, to the knowledge of Contributor, threatened. Contributor is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Contributor. Contributor has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Contributor nor any predecessor of Contributor is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Contributor has delivered to Pentegra correct and complete copies of Contributor's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Contributor during the three calendar year period preceding the date of this Agreement. Contributor has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Contributor does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Contributor and Partners have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Partner. Nothing contained herein shall prohibit Contributor from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Contributor or Contributor's Partners resulting from any action taken by Contributor or any Partner or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Contributor did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Contributor and Partners do not know, or have reasonable grounds to know, of any basis for the assertion against Contributor or any Partner as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Contributor (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Contributor, each Partner and each licensed professional of Contributor carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Partners nor Contributor have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Contributor, nor any Partner nor any licensed professional employee of Contributor has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Contributor has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Contributor Plan," and collectively "Contributor Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Contributor has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Contributor Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Contributor Plans. Contributor has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Contributor Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Partners and Contributor's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Contributor, any Partner or any licensed professional employee of Contributor of any Federal, state or local law or regulation. Contributor and Partners have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Contributor. 2.24 THIRD PARTY PAYORS. Contributor, Partners and each licensed professional employee or independent contractor of Contributor has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Contributor, any Partner and each licensed professional employee of Contributor. Neither Contributor, nor any Partner, nor any licensed professional employee of Contributor has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Contributor, Partners and Contributor's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Contributor or Partners in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Contributor or any Partner and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Contributor has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Contributor, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Contributor or any organization that has a material contract or arrangement with Contributor. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Contributor's services which accounted for more than 10% of revenues of Contributor in the preceding fiscal year. Contributor has good relations with all such payors and other material payors of Contributor and none of such payors has notified Contributor that it intends to discontinue its relationship with Contributor or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Contributor and Partners as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Contributor or any Partner pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF CONTRIBUTOR AND PARTNERS. Contributor and Partners, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Partners shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Contributor and Partners agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Contributor and Partners shall operate the Business and use the Assets in the ordinary course. Contributor and Partners shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Contributor and Partners shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Contributor and Partners shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Contributor. Contributor and Partners shall collect its receivables and pay its trade payables in the ordinary course of business. Contributor and Partners shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Contributor and Partners shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Contributor, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Contributor, the Business or the Assets as Pentegra or its representatives may request. Contributor and Partners shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Contributor is a party or relating to the Business or the Assets, and (b) any adverse change in Contributor's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor and Partners shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Contributor and Partners shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of Contributor contemplated by the Service Agreement and to conduct the intended business of Contributor and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of the Closing or the termination of this Agreement in accordance with the provisions hereof, Contributor and Partners shall not, and shall use its best efforts to cause Contributor's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Partner, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Contributor or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Contributor and Partners will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Contributor and Partners shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Contributor or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Contributor to any employee or other person or entity (including, without limitation, any Contributor Plan and any liability under employment contracts with Contributor) allocable to services performed prior to the Closing Date. Contributor and Partners acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Contributor's employees or similar persons or entities, including, without limitation, any Contributor Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Partner (other than in the ordinary course of business) or other employee or an independent contractor of Contributor, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Contributor, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Contributor, nor will any repurchase of any of Contributor's partnership interests be approved or effected. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Partners shall use their best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Contributor and Partners will not change in any material respect the tax or financial accounting methods or practices followed by Contributor (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Contributor and Partners will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Contributor required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Partners and Contributor hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Contributor and Partners covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Contributor prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Contributor and Partners shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Contributor and Partners may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Contributor and Partners agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Contributor leases any of its premises from any Partner or other affiliate of Contributor or any Partner of Contributor, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Contributor and Partners shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dentist employees of Contributor designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Contributor and Partners shall remain liable under any Contributor Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Contributor's employees incurred by Contributor prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that all employees of Contributor hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Contributor and shall be treated as Clinic employees for purposes of eligibility and participation in Contributor Plans. 4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND PARTNERS. Pentegra, Partners and Contributor agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Contributor and Partners shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Contributor and Partners shall furnish all information concerning Contributor and Partners as may be reasonable requested in connection with any such action. Contributor and Partner represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Contributor and Partners shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Contributor and Partners shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Contributor and Partners contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Contributor and Partners shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Contributor and Partners prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Contributor, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Contributor. Each Partner shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Partner shall, among other things, guaranty the obligations of Contributor under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and caused each Partner of Contributor that has an existing employment agreement with Contributor to have terminated his or her employment agreement with Contributor and shall have executed an employment agreement ("Employment Agreement") with Contributor in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Contributor and Pentegra. 7.9 CONSENTS AND APPROVALS. Contributor and Partners shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Contributor and its Partners or affiliates and Contributor shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Contributor and Partners shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Contributor since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. CONTRIBUTOR'S AND PARTNERS' CONDITIONS PRECEDENT. The obligations of Contributor and Partners hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Contributor shall have received all documents, duly executed in form satisfactory to Contributor and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF CONTRIBUTOR AND PARTNERS. Within five business days after requested by Pentegra, Contributor and Partners shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Partners authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) a bill of sale conveying the Assets to Pentegra; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (f) certificates of the Partners and a duly authorized officer of Contributor dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Contributor and Partners contained herein; (ii) as to the performance of and compliance by Contributor and Partner with all covenants contained herein; and (iii) certifying that all conditions precedent of Contributor and Partners to the Closing have been satisfied; (g) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Contributor and any state of required foreign qualification of Contributor establishing that Contributor is in existence and is in good standing to transact business in its state of incorporation; (h) an opinion of counsel to Contributor and Partner opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Contributor, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (i) non-foreign affidavits executed by Contributor; (j) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (k) an executed Registration Rights Agreement between Pentegra and Contributor, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (l) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Contributor and Partner, the following, all of which shall be in a form satisfactory to counsel to Contributor and Partners and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Contributor; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Contributor; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Contributor to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Contributor and Partners, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD CONTRIBUTOR AND ITS PartnerS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING CONTRIBUTOR AND PartnerS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY CONTRIBUTOR AND PARTNERS. CONTRIBUTOR AND PARTNERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, PARTNERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY CONTRIBUTOR OR ITS PARTNERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE CONTRIBUTOR OR PARTNERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF CONTRIBUTOR OR ANY PARTNER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR ANY PARTNER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF CONTRIBUTOR OR THE PARTNERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS PARTNERS AND PROVIDED TO PENTEGRA, OR ITS COUNSEL BY THE CONTRIBUTOR OR ITS PARTNERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS PARTNERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Contributor or any Partner giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Contributor or any Partner contained in this Agreement or in any certificate or other document executed and delivered by Contributor or any Partner pursuant to this Agreement is or becomes untrue or breached in any material respect or if Contributor or any Partner fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Contributor or any Partner if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Partners or Contributor if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Contributor, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Contributor shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Contributor pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Partners acknowledge that the shares of Pentegra Common Stock to be delivered to Contributor pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Contributor pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Contributor covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Contributor resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Partners are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Contributor, Partners and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Contributor, Partners and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Contractor and Partners are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and Partners recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Contributor and Partners agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Contributor or Partners, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Contributor and Partners shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Contributor and Partners reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Contributor and Partners are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Contributor or Partners of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Contributor and Partners from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Partners, Contributor and Pentegra shall be filed in a manner consistent with such intention and Contributor and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Contributor or Partners: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Contributor or any Partner for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Contributor. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF CONTRIBUTOR AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Contributor, be relieved from its obligations to Contributor under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Contributor, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Contributor and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Contributor or may demand from Contributor, and Contributor agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Contributors or Partners (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. JACKSON DENTAL PARTNERSHIP a Texas partnership By: /s/ Penn Jackson, Sr. ---------------------------- Penn Jackson, Sr., Partner By: /s/ Penn Jackson, Jr. ---------------------------- Penn Jackson, Jr., Partner PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman ---------------------------- Its: Senior Vice President ---------------------------- /s/ Penn Jackson, Sr. -------------------------------- Penn Jackson, Sr. D.D.S. /s/ Penn Jackson, Jr. -------------------------------- Penn Jackson, Jr. D.D.S. INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 Existence; Good Standing; Partners/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.25 21 EXHIBIT 2.25 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., and BRUCE A. KANEHL, D.D.S. TABLE OF CONTENTS
Page ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. 2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 3 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 3 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 7 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 7 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 8 3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 4. COVENANTS OF DENTIST. 4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 9 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 9 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 9 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . 10 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 10 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 10 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . . . . 10 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 11 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 11 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 11 Section 6. COVENANTS OF PENTEGRA AND DENTIST 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 12 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 12 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 12 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 12 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 8. DENTIST'S CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 13 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . . . . . . 16 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 17 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 18 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 19 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . 20 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . 21 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . 21 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . 21 14.12 NO RULE OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . 21 14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.15 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.16 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra") and BRUCE A. KANEHL, D.D.S. ("Dentist"). WITNESSETH: WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires to receive from Dentist, certain assets of Dentist; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Dentist, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Dentist shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Dentist's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Dentist shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Dentist contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Dentist the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Dentist, including, but not limited to, liabilities arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by Dentist, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Dentist reflected on the books of Dentist at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Dentist, any licensed professional employee or independent contractor of Dentist, (vi) any liability for the payment of any taxes of Dentist, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Dentist. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Dentist shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. Dentist hereby represents and warrants to Pentegra as follows: 2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the State of Florida. Dentist does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Dentist and constitute or will constitute the legal, valid and binding obligations of Dentist in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Dentist is a party or by which Dentist is bound, or violate any material restrictions of any kind to which Dentist is subject, or result in any lien or encumbrance on any of Dentist's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Dentist, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Dentist. 2.5 [INTENTIONALLY DELETED]. 2.6 [INTENTIONALLY DELETED]. 2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Dentist as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Dentist. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Dentist leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Dentist, as lessor or lessee, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Dentist has not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Dentist has no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Dentist, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Dentist has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Dentist, including the names of any entities from whom Dentist previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Dentist in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Dentist has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the most recent payroll report of Dentist, showing all current employees of Dentist and their current levels of compensation, (b) promised increases in compensation of employees of Dentist that have not yet been effected, (c) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Dentist is a party, copies of which have been delivered to Pentegra, and (d) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Dentist is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Dentist has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Dentist, and Dentist has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the Assets is subject to any pending, nor does Dentist have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Dentist, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Dentist, no basis for any such action exists, nor is there any legal impediment of which Dentist has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Dentist ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Dentist, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default. Dentist has no knowledge of any default by any other party to such Contracts. Dentist has not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Dentist, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Dentist on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (d) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (e) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Dentist since the Balance Sheet Date; (f) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (g) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (h) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (i) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (j) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (k) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; or (l) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Dentist has not received any notice that any tax deficiency or delinquency has been or may be asserted against Dentist. There are no audits relating to taxes of Dentist pending or in process or, to the knowledge of Dentist, threatened. Dentist is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Dentist. Dentist has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Dentist nor any predecessor of Dentist is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Dentist has delivered to Pentegra correct and complete copies of Dentist's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Dentist during the three calendar year period preceding the date of this Agreement. Dentist has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Dentist does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Nothing contained herein shall prohibit Dentist from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Dentist resulting from any action taken by Dentist or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Dentist does not know, or have reasonable grounds to know, of any basis for the assertion against Dentist as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Dentist (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Dentist has not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Dentist nor any licensed professional employee of Dentist has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Dentist has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Dentist has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Dentist Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Dentist Plans. Dentist has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Dentist Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Dentist or any licensed professional employee of Dentist of any Federal, state or local law or regulation. Dentist has not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Dentist. 2.24 THIRD PARTY PAYORS. Dentist and each licensed professional employee or independent contractor of Dentist has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Dentist and each licensed professional employee of Dentist. Neither Dentist nor any licensed professional employee of Dentist has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Dentist and Dentist's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by Dentist or to be furnished by Dentist to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Dentist has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or employee or family member of Dentist, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Dentist or any organization that has a material contract or arrangement with Dentist. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Dentist's services which accounted for more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has good relations with all such payors and other material payors of Dentist and none of such payors has notified Dentist that it intends to discontinue its relationship with Dentist or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Dentist as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF DENTIST. Dentist agrees that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Dentist agrees to complete the Exhibits hereto to be provided by him in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the Assets in the ordinary course. Dentist shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Dentist shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Dentist shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Dentist. Dentist shall collect its receivables and pay its trade payables in the ordinary course of business. Dentist shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Dentist, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Dentist, the Business or the Assets as Pentegra or its representatives may request. Dentist shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Dentist is a party or relating to the Business or the Assets, and (b) any adverse change in Dentist's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall use his best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Dentist shall not, and shall use its best efforts to cause Dentist's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to the Dentist, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Dentist or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Dentist will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Dentist shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Dentist or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Dentist to any employee or other person or entity (including, without limitation, any Dentist Plan and any liability under employment contracts with Dentist) allocable to services performed prior to the Closing Date. Dentist acknowledges that the purpose and intent of this covenant is to assure that Pentegra shall have no liability whatsoever at any time after the Closing Date with respect to any of Dentist's employees or similar persons or entities, including, without limitation, any Dentist Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of the Dentist (other than in the ordinary course of business) or other employee or an independent contractor of Dentist, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Dentist, its business, assets or prospects. 4.8 [INTENTIONALLY OMITTED]. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material respect the tax or financial accounting methods or practices followed by Dentist (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Dentist will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Dentist required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Dentist covenants and agrees that all of the creditors with respect to the Business and the Assets will be paid in full by Dentist prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Dentist may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Dentist agrees to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Dentist leases any of its premises from the Dentist or other affiliate of Dentist, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Dentist designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Dentist shall remain liable under any Dentist Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Dentist's employees incurred by Dentist prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and shall be treated as Clinic employees for purposes of eligibility and participation in Dentist Plans. 4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the Dentist and the Practice are to practice dentistry. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Dentist shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of thePractice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and has filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND DENTIST. Pentegra and Dentist agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Dentist shall furnish all information concerning Dentist as may be reasonable requested in connection with any such action. Dentist represents and warrants that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Dentist shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Dentist shall furnish Pentegra will all information concerning itself and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Dentist contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Dentist prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Dentist, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Dentist shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Dentist shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her employment agreement and executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra. 7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Dentist and its affiliates and Dentist shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured on irs liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Dentist since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. DENTIST'S CONDITIONS PRECEDENT. The obligations of Dentist hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly executed in form satisfactory to Dentist and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF DENTIST. Within five business days after requested by Pentegra, Dentist shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreemen and security agreement referred to therein; (b) executed Employment Agreements; (c) a bill of sale conveying the Assets to Pentegra; (d) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (e) certificates of Dentist dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Dentist contained herein; (ii) as to the performance of and compliance by Dentist with all covenants contained herein; and (iii) certifying that all conditions precedent of Dentist to the Closing have been satisfied; (f) an opinion of counsel to Dentist opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Dentist, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (g) non-foreign affidavits executed by Dentist; (h) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (i) an executed Registration Rights Agreement between Pentegra and Dentist, in substantially the form attached hereto as EXHIBIT 9.1(L) (the "Registration Rights Agreement"); and (j) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Dentist the following, all of which shall be in a form satisfactory to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Dentist; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Dentist; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Dentist to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Dentist or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(B), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Dentist giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Dentist contained in this Agreement or in any certificate or other document executed and delivered by Dentist pursuant to this Agreement is or becomes untrue or breached in any material respect or if Dentist fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Dentist if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra or Dentist if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Dentist, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Dentist pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the shares of Pentegra Common Stock to be delivered to Dentist pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Dentist covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Dentist resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect its own interests in connection with the acquisition of the Pentegra Common Stock. Dentist and its representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Dentist and its representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Dentist is an "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes and acknowledges that it had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Dentist agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Dentist, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Dentist shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Dentist reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Dentist is the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Dentist from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Dentist and Pentegra shall be filed in a manner consistent with such intention and Dentist and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Dentist: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Dentist for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Dentist. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Dentist, be relieved from its obligations to Dentist under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Dentist, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman ----------------------------------- Its: Senior Vice President ----------------------------------- /s/ Bruce A. Kanehl, D.D.S. ----------------------------------- Bruce A. Kanehl, D.D.S. INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 [intentionally omitted] 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.26 22 EXHIBIT 2.26 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., ROGER ALLEN KAY, D.D.S., P.A. and ROGER A. KAY, D.D.S. TABLE OF CONTENTS
PAGE ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . 3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 12 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 12 Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 13 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 13 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 13 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 14 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 14 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS . . . . . . . . . . . . . 17 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 18 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 19 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 20 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . 21 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . 21 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . 21 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . 22 14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), ROGER ALLEN KAY, D.D.S., P.A., a Maine professional association ("Contributor") and ROGER A. KAY, D.D.S., shareholder of Contributor (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Contributor operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra desires to receive from Contributor, certain assets of Contributor; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Contributor, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Contributor shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Contributor's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Contributor shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Contributor contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Contributor the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Contributor listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Contributor, including, but not limited to, liabilities arising under any Contributor Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by any Shareholder or Contributor, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Contributor reflected on the books of Contributor at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Contributor, any licensed professional employee or independent contractor of Contributor or any Shareholder, (vi) any liability for the payment of any taxes of Contributor or any Shareholder, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Contributor or any Shareholder. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, Contributor and Shareholders shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS. Contributor and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Contributor is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Maine. ontributor has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Contributor does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Contributor a party to any joint venture or partnership. The Shareholders are the sole shareholders of Contributor and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Contributor's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Contributor are owned by Contributor in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Contributor on any matter, (b) securities of Contributor convertible into equity interests in Contributor, or (c) commitments, options, rights or warrants to issue any such equity interests in Contributor, to issue securities of Contributor convertible into such equity interests, or to redeem any securities of Contributor. No shares of capital stock of Contributor have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Contributor's stockholders. Contributor is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Contributor does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Contributor has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Contributor and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Contributor and Shareholders, enforceable against Contributor and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Contributor or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Contributor or any Shareholder is a party or by which Contributor or any Shareholder is bound, or violate any material restrictions of any kind to which Contributor is subject, or result in any lien or encumbrance on any of Contributor's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Contributor and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Contributor or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Contributor on any of its capital stock since the Balance Sheet Date. No repurchase of any of Contributor's capital stock has been approved, effected or is pending, or is contemplated by Contributor. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Contributor and all amendments thereto have been delivered to Pentegra. The minute books of Contributor contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Contributor since its formation. The books of account of Contributor have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Contributor have been properly recorded in such books. 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Contributor as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Contributor. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Contributor or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Contributor, as lessor or lessee, or any condition or event of which any Shareholder or Contributor has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Contributor or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Contributor and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Contributor, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Contributor has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Contributor, including the names of any entities from whom Contributor previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Contributor is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Contributor in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Contributor has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Contributor and the offices held by each, (b) the most recent payroll report of Contributor, showing all current employees of Contributor and their current levels of compensation, (c) promised increases in compensation of employees of Contributor that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Contributor is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Contributor is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Contributor has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Contributor, and Contributor has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Contributor nor the Business nor any of the Assets is subject to any pending, nor does Contributor or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Contributor, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Contributor and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Contributor or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Contributor ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Contributor or any Shareholder, or any condition or event of which Contributor or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Contributor and Shareholders have no knowledge of any default by any other party to such Contracts. Contributor and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Contributor are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Contributor or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Contributor on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Contributor has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Contributor since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Contributor; (o) Repurchased, approved any repurchase or agreed to repurchase any of Contributor's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Contributor has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Contributor has not received any notice that any tax deficiency or delinquency has been or may be asserted against Contributor. There are no audits relating to taxes of Contributor pending or in process or, to the knowledge of Contributor, threatened. Contributor is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Contributor. Contributor has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Contributor nor any predecessor of Contributor is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Contributor has delivered to Pentegra correct and complete copies of Contributor's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Contributor during the three calendar year period preceding the date of this Agreement. Contributor has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Contributor does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Contributor and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Contributor from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Contributor or Contributor's shareholders resulting from any action taken by Contributor or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Contributor did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Contributor and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Contributor or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Contributor (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Contributor, each Shareholder and each licensed professional of Contributor carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Contributor have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Contributor, nor any Shareholder nor any licensed professional employee of Contributor has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Contributor has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Contributor Plan," and collectively "Contributor Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Contributor has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Contributor Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Contributor Plans. Contributor has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Contributor Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Shareholders and Contributor's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Contributor, any Shareholder or any licensed professional employee of Contributor of any Federal, state or local law or regulation. Contributor and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Contributor. 2.24 THIRD PARTY PAYORS. Contributor, Shareholders and each licensed professional employee or independent contractor of Contributor has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Contributor, any Shareholder and each licensed professional employee of Contributor. Neither Contributor, nor any Shareholder, nor any licensed professional employee of Contributor has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Contributor, Shareholders and Contributor's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Contributor or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Contributor or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Contributor has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Contributor, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Contributor or any organization that has a material contract or arrangement with Contributor. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Contributor's services which accounted for more than 10% of revenues of Contributor in the preceding fiscal year. Contributor has good relations with all such payors and other material payors of Contributor and none of such payors has notified Contributor that it intends to discontinue its relationship with Contributor or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Contributor and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Contributor or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS. Contributor and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Contributor and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Contributor and Shareholders shall operate the Business and use the Assets in the ordinary course. Contributor and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Contributor and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Contributor and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Contributor. Contributor and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Contributor and Shareholdes shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Contributor and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Contributor, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Contributor, the Business or the Assets as Pentegra or its representatives may request. Contributor and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Contributor is a party or relating to the Business or the Assets, and (b) any adverse change in Contributor's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Contributor and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of Contributor contemplated by the Service Agreement and to conduct the intended business of Contributor and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Contributor and Shareholders shall not, and shall use its best efforts to cause Contributor's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Contributor or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Contributor and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Contributor and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Contributor or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Contributor to any employee or other person or entity (including, without limitation, any Contributor Plan and any liability under employment contracts with Contributor) allocable to services performed prior to the Closing Date. Contributor and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Contributor's employees or similar persons or entities, including, without limitation, any Contributor Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Contributor, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Contributor, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Contributor, nor will any repurchase of any of Contributor's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Contributor and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Contributor (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Contributor and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Contributor required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Contributor hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Contributor and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Contributor prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Contributor and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Contributor and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Contributor and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Contributor leases any of its premises from any Shareholder or other affiliate of Contributor or any shareholder of Contributor, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Contributor and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Contributor designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Contributor and Shareholders shall remain liable under any Contributor Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Contributor's employees incurred by Contributor prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that all employees of Contributor hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Contributor and shall be treated as Clinic employees for purposes of eligibility and participation in Contributor Plans. 4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS. Pentegra, Shareholders and Contributor agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Contributor and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Contributor and Shareholders shall furnish all information concerning Contributor and Shareholders as may be reasonable requested in connection with any such action. Contributor and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Contributor and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Contributor and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Contributor and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Contributor and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Contributor and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Contributor, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Contributor. Each Shareholder shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of Contributor under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and caused each shareholder of Contributor that has an existing employment agreement with Contributor to have terminated his or her employment agreement with Contributor and shall have executed an employment agreement ("Employment Agreement") with Contributor in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Contributor and Pentegra. 7.9 CONSENTS AND APPROVALS. Contributor and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Contributor and its shareholders or affiliates and Contributor shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Contributor and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Contributor since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Contributor and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Contributor shall have received all documents, duly executed in form satisfactory to Contributor and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. Within five business days after requested by Pentegra, Contributor and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Contributor authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) a bill of sale conveying the Assets to Pentegra; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (f) certificates of the Shareholders and a duly authorized officer of Contributor dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Contributor and Shareholder contained herein; (ii) as to the performance of and compliance by Contributor and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Contributor and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Contributor certifying as to the incumbency of the directors and officers of Contributor and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Contributor; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Contributor and any state of required foreign qualification of Contributor establishing that Contributor is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Contributor and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Contributor, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Contributor; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Contributor, in substantially the form attached hereto as EXHIBIT 9.1(L) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Contributor and Shareholder, the following, all of which shall be in a form satisfactory to counsel to Contributor and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Contributor; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Contributor; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Contributor to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Contributor and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD CONTRIBUTOR AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING CONTRIBUTOR AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. CONTRIBUTOR AND SHAREHOLDERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY CONTRIBUTOR OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE CONTRIBUTOR OR SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF CONTRIBUTOR OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF CONTRIBUTOR OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(B), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE CONTRIBUTOR OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Contributor or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Contributor or Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Contributor or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Contributor or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Contributor or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Contributor if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Contributor, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Contributor shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Contributor pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Contributor pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Contributor pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Contributor covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Contributor resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Contributor, Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Contributor, Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Contributor and Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Contributor and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Contributor or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Contributor and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Contributor and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Contributor and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Contributor or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Contributor and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Shareholders, Contributor and Pentegra shall be filed in a manner consistent with such intention and Contributor and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Contributor or Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Contributor or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Contributor. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF CONTRIBUTOR AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Contributor, be relieved from its obligations to Contributor under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Contributor, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Contributor and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Contributor or may demand from Contributor, and Contributor agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Contributors or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. ROGER ALLEN KAY, D.D.S., P.A. By: /s/ Roger A. Kay, D.D.S. -------------------------------- Roger A. Kay, DDS, President PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman -------------------------------- Its: Senior VP ------------------------------- /s/ Roger A. Kay, D.D.S. ----------------------------------- Roger A. Kay, DDS INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.27 23 EXHIBIT 2.27 AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG PENTEGRA DENTAL GROUP, INC., PATRICK T. KELLY, D.D.S., P.C. and PATRICK T. KELLY, D.D.S. TABLE OF CONTENTS Page ---- Section 1. TERMS OF THE REORGANIZATION 1.2 MERGER.............................................................. 1 1.3 CERTIFICATE OF INCORPORATION; BYLAWS................................ 2 1.7 SUBSEQUENT ACTIONS.................................................. 2 Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING.................................. 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS................................ 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS .................. 3 2.4 CONSENTS............................................................ 3 2.5 DISTRIBUTIONS AND REPURCHASES ...................................... 3 2.6 CORPORATE RECORDS .................................................. 3 2.7 COMPANY'S FINANCIAL INFORMATION .................................... 4 2.8 LEASES.............................................................. 4 2.9 CONDITION OF ASSETS ................................................ 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY .............................. 4 2.11 INVENTORIES ........................................................ 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES ................................ 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES.............. 4 2.14 LEGAL PROCEEDINGS .................................................. 5 2.15 CONTRACTS .......................................................... 5 2.16 SUBSEQUENT EVENTS .................................................. 6 2.17 TAXES .............................................................. 7 2.18 COMMISSIONS AND FEES................................................ 7 2.19 LIABILITIES; DEBT .................................................. 7 2.20 INSURANCE POLICIES.................................................. 7 2.21 EMPLOYEE BENEFIT PLANS.............................................. 7 2.22 ADVERSE AGREEMENTS.................................................. 8 2.23 COMPLIANCE WITH LAWS IN GENERAL .................................... 8 2.24 THIRD PARTY PAYORS.................................................. 8 2.25 NO UNTRUE REPRESENTATIONS .......................................... 8 2.26 BANKING RELATIONS .................................................. 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS.............. 9 2.28 PAYORS.............................................................. 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING.................................. 9 3.2 POWER AND AUTHORITY; CONSENTS ...................................... 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS .................. 9 3.4 LEGAL PROCEEDINGS .................................................. 9 3.5 TAXES .............................................................. 10 3.6 COMMISSIONS AND FEES................................................ 10 3.7 CAPITAL STOCK ...................................................... 10 3.8 NO UNTRUE REPRESENTATIONS .......................................... 10 Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS ................................ 10 4.2 BUSINESS OPERATIONS ................................................ 10 4.3 ACCESS AND NOTICE .................................................. 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS ................ 10 4.5 ACQUISITION PROPOSALS .............................................. 11 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS................................ 11 4.7 EMPLOYEE MATTERS.................................................... 11 4.8 DISTRIBUTIONS AND REPURCHASES ...................................... 11 4.9 REQUIREMENTS TO EFFECT REORGANIZATION .............................. 11 4.10 ACCOUNTING AND TAX MATTERS.......................................... 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE.................................. 11 4.12 LEASE .............................................................. 12 4.13 HIRING OF EMPLOYEES ................................................ 12 4.14 EMPLOYEE BENEFIT PLANS.............................................. 12 4.15 INSURANCE .......................................................... 12 4.17 CORPORATE RECORDS .................................................. 12 4.18 POWER AND AUTHORITY FOR TRANSACTIONS................................ 12 4.19 NO BUSINESS ........................................................ 13 4.20 COMPLIANCE WITH LAWS................................................ 13 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS ................................ 13 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS ................ 13 Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS.............................................. 13 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES...................................... 14 7.2 COVENANTS AND CONDITIONS............................................ 14 7.3 PROCEEDINGS ........................................................ 14 7.4 NO MATERIAL ADVERSE CHANGE.......................................... 14 7.5 DUE DILIGENCE REVIEW................................................ 14 7.6 APPROVAL BY THE BOARD OF DIRECTORS.................................. 14 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT .............................. 14 7.8 EMPLOYMENT ARRANGEMENTS ............................................ 14 7.9 CONSENTS AND APPROVALS.............................................. 14 7.10 CLOSING DELIVERIES.................................................. 14 7.11 DEBT AND RECEIVABLES................................................ 14 7.12 INSURANCE .......................................................... 14 7.13 NO CHANGE IN WORKING CAPITAL........................................ 15 7.14 SECURITIES APPROVAL ................................................ 15 Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES...................................... 15 8.2 COVENANTS AND CONDITIONS............................................ 15 8.3 PROCEEDINGS ........................................................ 15 8.4 CLOSING DELIVERIES.................................................. 15 8.5 SECURITIES APPROVAL ................................................ 15 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS.............................. 15 9.2 DELIVERIES OF PENTEGRA.............................................. 16 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL ................................................ 17 10.2 INDEMNIFICATION BY PENTEGRA ........................................ 17 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS ........................ 18 10.4 INDEMNIFICATION PROCEDURE .......................................... 19 10.5 RIGHT OF SETOFF .................................................... 19 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS .............................................. 20 12.2 INVESTMENTS; COMPLIANCE WITH LAW.................................... 20 12.3 ECONOMIC RISK; SOPHISTICATION ...................................... 21 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT........................................................ 21 14.2 NOTICES ............................................................ 21 14.3 FURTHER ASSURANCES.................................................. 22 14.4 EACH PARTY TO BEAR COSTS............................................ 22 14.5 PUBLIC DISCLOSURES.................................................. 22 14.6 GOVERNING LAW ...................................................... 22 14.7 CAPTIONS............................................................ 22 14.8 INTEGRATION OF EXHIBITS ............................................ 22 14.9 ENTIRE AGREEMENT/AMENDMENT.......................................... 22 14.10 COUNTERPARTS ....................................................... 23 14.11 BINDING EFFECT/ASSIGNMENT........................................... 23 14.12 COSTS OF ENFORCEMENT ............................................... 23 14.13 PRORATIONS ......................................................... 23 14.14 AMENDMENTS; WAIVERS................................................. 23 14.15 ARBITRATION......................................................... 23 14.16 SEVERABILITY ....................................................... 24 AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), PATRICK T. KELLY, D.D.S., P.C., a Michigan professional corporation ("Company") and PATRICK T. KELLY, D.D.S., shareholder of Company (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Company operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, the Boards of Directors of the Company and Pentegra have determined that a reorganization between each of them is in the best interests of their respective companies; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Company, the "Target Companies") and simultaneously with the closing of the reorganization contemplated herein, intends to consummate its initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock"); WHEREAS, it is intended for Federal income tax purposes that the reorganization contemplated by this Agreement shall qualify as an reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE REORGANIZATION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 MERGER. Subject to and upon the terms and conditions contained herein, on the Closing Date, the Company shall be merged with and into Pentegra (or its designated affiliate, in which case, the references herein to Pentegra shall be to such designated affiliate and its shares of common stock) in accordance with this Agreement and the separate corporate existence of the Company shall thereupon cease ("Merger"). Pentegra shall be the surviving corporation in the Merger ("Surviving Corporation") and shall continue to be governed by the laws of the State of Delaware and the separate corporate existence of Pentegra with all rights, privileges, powers, immunities and purposes shall continue unaffected by the Merger. The Merger shall have the effects specified in the Delaware General Corporation Law and the Michigan Business Corporation Law. If all the conditions to the Merger set forth herein shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated in accordance herewith, the parties hereto shall cause to be properly executed and filed on the Closing Date Certificates of Merger for the Company meeting the applicable legal requirements. The Mergers shall become effective on the Closing Date or the filing of such documents, in accordance with applicable law, or at such later time as the parties hereto have agreed upon and designated in such merger filings. 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation until duly amended in accordance with their terms. 1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra immediately prior to the effective date of the Merger shall be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. The persons who are officers of Pentegra immediately prior to the effective date of the Merger shall be the officers of the Surviving Corporation and shall hold their respective offices until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal. 1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and without any action on the part of the holder thereof, all shares of the Company's common stock issued and outstanding on the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired and shall cease to exist, and each holder of a certificate of representing shares of Company common stock shall thereafter cease to have any rights with respect to such shares except the right to receive the consideration set forth on ANNEX I attached hereto (the "Merger Consideration"). Each share of common stock of the Company held in treasury at the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired without payment of any consideration therefor. On the effective date of the Merger, each share of Pentegra Common Stock issued and outstanding shall, by virtue of he Mergers, and without any action on the part of the holder thereof, continue unchanged and remain outstanding as a share of validly issued, fully paid and nonassessable share of Surviving Corporation common stock. 1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger, the Shareholders, as the holders of a certificate or certificates representing shares of Company common stock shall, upon surrender of such certificate or certificates, receive the Merger Consideration, and until the certificate or certificates of Company common stock shall have been surrendered by the Shareholder and replaced by a certificate or certificates representing Pentegra Common Stock (as set forth on ANNEX I), the certificate or certificates of Company common stock shall, for all purposes be deemed to evidence ownership of the number of shares of Pentegra Common Stock determined in accordance with the provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the Shareholders in the Merger shall be deemed for all purposes to have been issued by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at Closing the certificate or certificates representing the Company common stock owned by them, duly endorsed in blank by the Shareholders, or accompanied by duly executed blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the Shareholder's expense, affixed and cancelled. 1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Company and Shareholders shall excecute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Michigan. Company has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Company does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Company a party to any joint venture or partnership. The Shareholders are the sole shareholders of Company and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Company are owned by Company in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Company on any matter, (b) securities of Company convertible into equity interests in Company, or (c) commitments, options, rights or warrants to issue any such equity interests in Company, to issue securities of Company convertible into such equity interests, or to redeem any securities of Company. No shares of capital stock of Company have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Company's stockholders. Company is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Company does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Company has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Company and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Company and Shareholders, enforceable against Company and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Company or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Company or any Shareholder is a party or by which Company or any Shareholder is bound, or violate any material restrictions of any kind to which Company is subject, or result in any lien or encumbrance on any of Company's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Company and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Company or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Company on any of its capital stock since the Balance Sheet Date. No repurchase of any of Company's capital stock has been approved, effected or is pending, or is contemplated by Company. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Company and all amendments thereto have been delivered to Pentegra. The minute books of Company contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Company since its formation. The books of account of Company have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Company have been properly recorded in such books. 2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Company as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Company. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Company or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Company, as lessor or lessee, or any condition or event of which any Shareholder or Company has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Company or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Company and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Company, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Company has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Company, including the names of any entities from whom Company previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Company in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Company has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Company and the offices held by each, (b) the most recent payroll report of Company, showing all current employees of Company and their current levels of compensation, (c) promised increases in compensation of employees of Company that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Company is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Company is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Company has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Company, and Company has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the Business nor any of the Assets is subject to any pending, nor does Company or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Company, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Company and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Company or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Company has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Company ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Company or any Shareholder, or any condition or event of which Company or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Company and Shareholders have no knowledge of any default by any other party to such Contracts. Company and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Company or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Company on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Company since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Company; (o) Repurchased, approved any repurchase or agreed to repurchase any of Company's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Company has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Company has not received any notice that any tax deficiency or delinquency has been or may be asserted against Company. There are no audits relating to taxes of Company pending or in process or, to the knowledge of Company, threatened. Company is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Company. Company has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Company nor any predecessor of Company is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Company has delivered to Pentegra correct and complete copies of Company's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Company during the three calendar year period preceding the date of this Agreement. Company has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) No Shareholder presently intends to dispose of any of the shares of Pentegra Common Stock to be received hereunder nor is a party to any plan, arrangement or agreement for the disposition of such shares. Company and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Shareholders from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Company or Company's shareholders resulting from any action taken by Company or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Company or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Company (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed professional of Company carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Company have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Company, nor any Shareholder nor any licensed professional employee of Company has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Company has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company Plan," and collectively "Company Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Company has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Company Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Company Plans. Company has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Company Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Company, any Shareholder or any licensed professional employee of Company of any Federal, state or local law or regulation. Company and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Company. 2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed professional employee or independent contractor of Company has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Company, any Shareholder and each licensed professional employee of Company. Neither Company, nor any Shareholder, nor any licensed professional employee of Company has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Company, Shareholders and Company's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Company or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Company has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Company, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Company or any organization that has a material contract or arrangement with Company. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Company's services which accounted for more than 10% of revenues of Company in the preceding fiscal year. Company has good relations with all such payors and other material payors of Company and none of such payors has notified Company that it intends to discontinue its relationship with Company or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Company and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the reorganization contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the reorganization contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Company or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Company and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the Business and use the Assets in the ordinary course. Company and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Company and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Company and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Company. Company and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Company and Shareholdes shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Company, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Company, the Business or the Assets as Pentegra or its representatives may request. Company and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Company is a party or relating to the Business or the Assets, and (b) any adverse change in Company's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Company and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Company and Shareholders shall not, and shall use its best efforts to cause Company's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Company or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Company and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Company and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Company or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Company to any employee or other person or entity (including, without limitation, any Company Plan and any liability under employment contracts with Company) allocable to services performed prior to the Closing Date. Company and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Company's employees or similar persons or entities, including, without limitation, any Company Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Company shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Company, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Company, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Company, nor will any repurchase of any of Company's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the reorganization contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Company (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Company and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Company required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Company hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Company and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Company prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Company and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Company and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Company leases any of its premises from any Shareholder or other affiliate of Company or any shareholder of Company, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dentist employees of Company designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Company and Shareholders shall remain liable under any Company Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Company's employees incurred by Company prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Company and shall be treated as Clinic employees for purposes of eligibility and participation in Company Plans. 4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the practice of dentistry is conducted by the Shareholders and the Practice. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Shareholders shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. The Company shall have transferred the Excluded Assets set forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for equity interest in the Practice, and the Company shall have distributed such equity interests in the Practice to the Shareholders. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and have filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS. Pentegra, Shareholders and Company agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Company and Shareholders shall furnish all information concerning Company and Shareholders as may be reasonable requested in connection with any such action. Company and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Company and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Company and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Company and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Company and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Company, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Each Shareholder shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused each shareholder of Company that has an existing employment agreement with Company to have terminated his or her employment agreement with Company and shall have executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Company and Pentegra. 7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Company and its shareholders or affiliates and Company shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Company since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Company and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Company shall have received all documents, duly executed in form satisfactory to Company and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days after requested by Pentegra, Company and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Company authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) executed merger certificate and/or plan as required by applicable state law; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra and the original stock certificates together with blank stock powers representing the outstanding shares of Company common stock; (f) certificates of the Shareholders and a duly authorized officer of Company dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Company and Shareholder contained herein; (ii) as to the performance of and compliance by Company and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Company and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Company certifying as to the incumbency of the directors and officers of Company and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Company; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Company and any state of required foreign qualification of Company establishing that Company is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Company and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Company, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Company; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Company and Shareholders, the following, all of which shall be in a form satisfactory to counsel to Company and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Merger Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Company; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Company; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Company to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Company and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Company or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Company or any Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Company or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Company or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Company or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Company if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Company, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Company pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Company pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Each Shareholder covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Company resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Company and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Company or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Company and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Company and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Company and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Company and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement will qualify as a reorganization within the meaning of Section 368(a) of the Code. The tax returns (and schedules thereto) of Shareholders, Company and Pentegra shall be filed in a manner consistent with such intention and Shareholders and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Company and Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Company or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Company. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Company, be relieved from its obligations to Company under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Company, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Company and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Company or may demand from Company, and Company agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Companys or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. PATRICK T. KELLY, D.D.S., P.C. By: /s/ Patrick T. Kelly ------------------------------------- Its: Owner ------------------------------------- PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman ------------------------------------- Its: Senior Vice President ------------------------------------- /s/ Patrick T. Kelly, D.D.S. ---------------------------------------- Patrick T. Kelly, D.D.S. INDEX TO EXHIBITS
Exhibit Description ------- ----------- Annex I Merger Consideration A Target Companies 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 4.16 Excluded Assets and Excluded Liabilities 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice
EX-2.28 24 EXHIBIT 2.28 AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG PENTEGRA DENTAL GROUP, INC., BRIAN K. KNIFF, D.D.S., P.C. BRIAN K. KNIFF, D.D.S. and GORDON LEDINGHAM, D.D.S. TABLE OF CONTENTS
Page ---- Section 1. TERMS OF THE REORGANIZATION 1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . . . . 2 1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 4 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 9 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 12 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 13 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 13 Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 14 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 14 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 14 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 14 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 14 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 15 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 15 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 15 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . . . . 15 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 17 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . . . 18 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 19 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 20 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 20 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 21 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . 22 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . 22 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . 22 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . 23 14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), BRIAN K. KNIFF, D.D.S., P.C., an Arizona professional corporation ("Cmpany") and BRIAN K. KNIFF, D.D.S. AND GORDON LEDINGHAM, D.D.S., shareholder of Company (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Company operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, the Boards of Directors of the Company and Pentegra have determined that a reorganization between each of them is in the best interests of their respective companies; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Company, the "Target Companies") and simultaneously with the closing of the reorganization contemplated herein, intends to consummate its initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock"); WHEREAS, it is intended for Federal income tax purposes that the reorganization contemplated by this Agreement shall qualify as an reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE REORGANIZATION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 MERGER. Subject to and upon the terms and conditions contained herein, on the Closing Date, the Company shall be merged with and into Pentegra (or its designated affiliate, in which case, the references herein to Pentegra shall be to such designated affiliate and its shares of common stock) in accordance with this Agreement and the separate corporate existence of the Company shall thereupon cease ("Merger"). Pentegra shall be the surviving corporation in the Merger ("Surviving Corporation") and shall continue to be governed by the laws of the State of Delaware and the separate corporate existence of Pentegra with all rights, privileges, powers, immunities and purposes shall continue unaffected by the Merger. The Merger shall have the effects specified in the Delaware General Corporation Law and the Arizona Business Corporation Law. If all the conditions to the Merger set forth herein shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated in accordance herewith, the parties hereto shall cause to be properly executed and filed on the Closing Date Certificates of Merger for the Company meeting the applicable legal requirements. The Mergers shall become effective on the Closing Date or the filing of such documents, in accordance with applicable law, or at such later time as the parties hereto have agreed upon and designated in such merger filings. 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation until duly amended in accordance with their terms. 1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra immediately prior to the effective date of the Merger shall be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. The persons who are officers of Pentegra immediately prior to the effective date of the Merger shall be the officers of the Surviving Corporation and shall hold their respective offices until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal. 1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and without any action on the part of the holder thereof, all shares of the Company's common stock issued and outstanding on the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired and shall cease to exist, and each holder of a certificate of representing shares of Company common stock shall thereafter cease to have any rights with respect to such shares except the right to receive the consideration set forth on ANNEX I attached hereto (the "Merger Consideration"). Each share of common stock of the Company held in treasury at the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired without payment of any consideration therefor. On the effective date of the Merger, each share of Pentegra Common Stock issued and outstanding shall, by virtue of he Mergers, and without any action on the part of the holder thereof, continue unchanged and remain outstanding as a share of validly issued, fully paid and nonassessable share of Surviving Corporation common stock. 1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger, the Shareholders, as the holders of a certificate or certificates representing shares of Company common stock shall, upon surrender of such certificate or certificates, receive the Merger Consideration, and until the certificate or certificates of Company common stock shall have been surrendered by the Shareholder and replaced by a certificate or certificates representing Pentegra Common Stock (as set forth on ANNEX I), the certificate or certificates of Company common stock shall, for all purposes be deemed to evidence ownership of the number of shares of Pentegra Common Stock determined in accordance with the provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the Shareholders in the Merger shall be deemed for all purposes to have been issued by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at Closing the certificate or certificates representing the Company common stock owned by them, duly endorsed in blank by the Shareholders, or accompanied by duly executed blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the Shareholder's expense, affixed and cancelled. 1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Company and Shareholders shall excecute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Arizona. Company has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Company does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Company a party to any joint venture or partnership. The Shareholders are the sole shareholders of Company and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Company are owned by Company in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Company on any matter, (b) securities of Company convertible into equity interests in Company, or (c) commitments, options, rights or warrants to issue any such equity interests in Company, to issue securities of Company convertible into such equity interests, or to redeem any securities of Company. No shares of capital stock of Company have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Company's stockholders. Company is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Company does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Company has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Company and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Company and Shareholders, enforceable against Company and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Company or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Company or any Shareholder is a party or by which Company or any Shareholder is bound, or violate any material restrictions of any kind to which Company is subject, or result in any lien or encumbrance on any of Company's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Company and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Company or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Company on any of its capital stock since the Balance Sheet Date. No repurchase of any of Company's capital stock has been approved, effected or is pending, or is contemplated by Company. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Company and all amendments thereto have been delivered to Pentegra. The minute books of Company contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Company since its formation. The books of account of Company have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Company have been properly recorded in such books. 2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Company as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Company. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Company or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Company, as lessor or lessee, or any condition or event of which any Shareholder or Company has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Company or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Company and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Company, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Company has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Company, including the names of any entities from whom Company previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Company in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Company has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Company and the offices held by each, (b) the most recent payroll report of Company, showing all current employees of Company and their current levels of compensation, (c) promised increases in compensation of employees of Company that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Company is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Company is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Company has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Company, and Company has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the Business nor any of the Assets is subject to any pending, nor does Company or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Company, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Company and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Company or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Company has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Company ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Company or any Shareholder, or any condition or event of which Company or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Company and Shareholders have no knowledge of any default by any other party to such Contracts. Company and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Company or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Company on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Company since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Company; (o) Repurchased, approved any repurchase or agreed to repurchase any of Company's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Company has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Company has not received any notice that any tax deficiency or delinquency has been or may be asserted against Company. There are no audits relating to taxes of Company pending or in process or, to the knowledge of Company, threatened. Company is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Company. Company has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Company nor any predecessor of Company is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Company has delivered to Pentegra correct and complete copies of Company's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Company during the three calendar year period preceding the date of this Agreement. Company has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) No Shareholder presently intends to dispose of any of the shares of Pentegra Common Stock to be received hereunder nor is a party to any plan, arrangement or agreement for the disposition of such shares. Company and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Shareholders from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Company or Company's shareholders resulting from any action taken by Company or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Company or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Company (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed professional of Company carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Company have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Company, nor any Shareholder nor any licensed professional employee of Company has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Company has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company Plan," and collectively "Company Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Company has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Company Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Company Plans. Company has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Company Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Company, any Shareholder or any licensed professional employee of Company of any Federal, state or local law or regulation. Company and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Company. 2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed professional employee or independent contractor of Company has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Company, any Shareholder and each licensed professional employee of Company. Neither Company, nor any Shareholder, nor any licensed professional employee of Company has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Company, Shareholders and Company's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Company or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Company has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Company, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Company or any organization that has a material contract or arrangement with Company. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Company's services which accounted for more than 10% of revenues of Company in the preceding fiscal year. Company has good relations with all such payors and other material payors of Company and none of such payors has notified Company that it intends to discontinue its relationship with Company or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Company and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the reorganization contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the reorganization contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Company or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Company and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the Business and use the Assets in the ordinary course. Company and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Company and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Company and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Company. Company and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Company and Shareholdes shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Company, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Company, the Business or the Assets as Pentegra or its representatives may request. Company and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Company is a party or relating to the Business or the Assets, and (b) any adverse change in Company's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Company and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Company and Shareholders shall not, and shall use its best efforts to cause Company's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Company or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Company and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Company and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Company or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Company to any employee or other person or entity (including, without limitation, any Company Plan and any liability under employment contracts with Company) allocable to services performed prior to the Closing Date. Company and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Company's employees or similar persons or entities, including, without limitation, any Company Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Company shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Company, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Company, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Company, nor will any repurchase of any of Company's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the reorganization contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Company (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Company and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Company required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Company hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Company and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Company prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Company and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Company and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Company leases any of its premises from any Shareholder or other affiliate of Company or any shareholder of Company, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dentist employees of Company designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Company and Shareholders shall remain liable under any Company Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Company's employees incurred by Company prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Company and shall be treated as Clinic employees for purposes of eligibility and participation in Company Plans. 4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the practice of dentistry is conducted by the Shareholders and the Practice. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Shareholders shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. The Company shall have transferred the Excluded Assets set forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for equity interest in the Practice, and the Company shall have distributed such equity interests in the Practice to the Shareholders. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and have filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS. Pentegra, Shareholders and Company agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Company and Shareholders shall furnish all information concerning Company and Shareholders as may be reasonable requested in connection with any such action. Company and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Company and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Company and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Company and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Company and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Company, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Each Shareholder shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused each shareholder of Company that has an existing employment agreement with Company to have terminated his or her employment agreement with Company and shall have executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Company and Pentegra. 7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Company and its shareholders or affiliates and Company shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Company since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Company and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Company shall have received all documents, duly executed in form satisfactory to Company and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days after requested by Pentegra, Company and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Company authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) executed merger certificate and/or plan as required by applicable state law; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra and the original stock certificates together with blank stock powers representing the outstanding shares of Company common stock; (f) certificates of the Shareholders and a duly authorized officer of Company dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Company and Shareholder contained herein; (ii) as to the performance of and compliance by Company and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Company and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Company certifying as to the incumbency of the directors and officers of Company and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Company; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Company and any state of required foreign qualification of Company establishing that Company is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Company and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Company, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Company; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Company and Shareholders, the following, all of which shall be in a form satisfactory to counsel to Company and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Merger Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Company; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Company; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Company to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Company and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Company or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Company or any Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Company or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Company or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Company or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Company if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Company, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Company pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Company pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Each Shareholder covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Company resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Company and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Company or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Company and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Company and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Company and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Company and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement will qualify as a reorganization within the meaning of Section 368(a) of the Code. The tax returns (and schedules thereto) of Shareholders, Company and Pentegra shall be filed in a manner consistent with such intention and Shareholders and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Company and Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Company or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Company. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Company, be relieved from its obligations to Company under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Company, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Company and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Company or may demand from Company, and Company agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Companys or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. BRIAN K. KNIFF, D.D.S., P.C. By: /s/ Brian K. Kniff, D.D.S. ---------------------------------------- Its: President ---------------------------------------- PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman ---------------------------------------- Its: Senior VP ---------------------------------------- /s/ Brian K. Kniff, D.D.S. -------------------------------------------- Brian K. Kniff, D.D.S. /s/ Gordon Ledingham, D.D.S. -------------------------------------------- Gordon Ledingham, D.D.S. INDEX TO EXHIBITS
Exhibit Description ------- ----------- Annex I Merger Consideration A Target Companies 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 4.16 Excluded Assets and Excluded Liabilities 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice
EX-2.29 25 EXHIBIT 2.29 AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG PENTEGRA DENTAL GROUP, INC., LAKEVIEW DENTAL, P.C. and KEVIN GASSER, D.D.S. TABLE OF CONTENTS
PAGE ---- Section 1. TERMS OF THE REORGANIZATION 1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . . . . 2 1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 4 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 9 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 12 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 13 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 13 Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 14 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 14 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 14 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 14 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 14 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 15 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 15 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 15 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . . . . 15 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 17 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . . . 18 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 19 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 20 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 20 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 21 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . . . 22 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . 22 14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . 23 14.12 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.13 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.14 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.15 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.16 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and executed effective August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), LAKEVIEW DENTAL, P.C., an Arizona professional corporation ("Company") and KEVIN GASSER, D.D.S., shareholder of Company (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Company operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, the Boards of Directors of the Company and Pentegra have determined that a reorganization between each of them is in the best interests of their respective companies; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Company, the "Target Companies") and simultaneously with the closing of the reorganization contemplated herein, intends to consummate its initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock"); WHEREAS, it is intended for Federal income tax purposes that the reorganization contemplated by this Agreement shall qualify as an reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE REORGANIZATION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 MERGER. Subject to and upon the terms and conditions contained herein, on the Closing Date, the Company shall be merged with and into Pentegra (or its designated affiliate, in which case, the references herein to Pentegra shall be to such designated affiliate and its shares of common stock) in accordance with this Agreement and the separate corporate existence of the Company shall thereupon cease ("Merger"). Pentegra shall be the surviving corporation in the Merger ("Surviving Corporation") and shall continue to be governed by the laws of the State of Delaware and the separate corporate existence of Pentegra with all rights, privileges, powers, immunities and purposes shall continue unaffected by the Merger. The Merger shall have the effects specified in the Delaware General Corporation Law and the Arizona Business Corporation Law. If all the conditions to the Merger set forth herein shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated in accordance herewith, the parties hereto shall cause to be properly executed and filed on the Closing Date Certificates of Merger for the Company meeting the applicable legal requirements. The Mergers shall become effective on the Closing Date or the filing of such documents, in accordance with applicable law, or at such later time as the parties hereto have agreed upon and designated in such merger filings. 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation until duly amended in accordance with their terms. 1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra immediately prior to the effective date of the Merger shall be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. The persons who are officers of Pentegra immediately prior to the effective date of the Merger shall be the officers of the Surviving Corporation and shall hold their respective offices until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal. 1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and without any action on the part of the holder thereof, all shares of the Company's common stock issued and outstanding on the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired and shall cease to exist, and each holder of a certificate of representing shares of Company common stock shall thereafter cease to have any rights with respect to such shares except the right to receive the consideration set forth on ANNEX I attached hereto (the "Merger Consideration"). Each share of common stock of the Company held in treasury at the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired without payment of any consideration therefor. On the effective date of the Merger, each share of Pentegra Common Stock issued and outstanding shall, by virtue of he Mergers, and without any action on the part of the holder thereof, continue unchanged and remain outstanding as a share of validly issued, fully paid and nonassessable share of Surviving Corporation common stock. 1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger, the Shareholders, as the holders of a certificate or certificates representing shares of Company common stock shall, upon surrender of such certificate or certificates, receive the Merger Consideration, and until the certificate or certificates of Company common stock shall have been surrendered by the Shareholder and replaced by a certificate or certificates representing Pentegra Common Stock (as set forth on ANNEX I), the certificate or certificates of Company common stock shall, for all purposes be deemed to evidence ownership of the number of shares of Pentegra Common Stock determined in accordance with the provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the Shareholders in the Merger shall be deemed for all purposes to have been issued by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at Closing the certificate or certificates representing the Company common stock owned by them, duly endorsed in blank by the Shareholders, or accompanied by duly executed blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the Shareholder's expense, affixed and cancelled. 1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Company and Shareholders shall excecute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Arizona. Company has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Company does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Company a party to any joint venture or partnership. The Shareholders are the sole shareholders of Company and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Company are owned by Company in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Company on any matter, (b) securities of Company convertible into equity interests in Company, or (c) commitments, options, rights or warrants to issue any such equity interests in Company, to issue securities of Company convertible into such equity interests, or to redeem any securities of Company. No shares of capital stock of Company have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Company's stockholders. Company is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Company does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Company has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Company and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Company and Shareholders, enforceable against Company and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Company or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Company or any Shareholder is a party or by which Company or any Shareholder is bound, or violate any material restrictions of any kind to which Company is subject, or result in any lien or encumbrance on any of Company's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Company and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Company or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Company on any of its capital stock since the Balance Sheet Date. No repurchase of any of Company's capital stock has been approved, effected or is pending, or is contemplated by Company. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Company and all amendments thereto have been delivered to Pentegra. The minute books of Company contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Company since its formation. The books of account of Company have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Company have been properly recorded in such books. 2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Company as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Company. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Company or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Company, as lessor or lessee, or any condition or event of which any Shareholder or Company has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Company or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Company and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Company, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Company has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Company, including the names of any entities from whom Company previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Company in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Company has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Company and the offices held by each, (b) the most recent payroll report of Company, showing all current employees of Company and their current levels of compensation, (c) promised increases in compensation of employees of Company that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Company is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Company is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Company has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Company, and Company has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the Business nor any of the Assets is subject to any pending, nor does Company or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Company, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Company and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Company or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Company has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Company ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Company or any Shareholder, or any condition or event of which Company or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Company and Shareholders have no knowledge of any default by any other party to such Contracts. Company and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Company or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Company on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Company since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Company; (o) Repurchased, approved any repurchase or agreed to repurchase any of Company's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Company has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Company has not received any notice that any tax deficiency or delinquency has been or may be asserted against Company. There are no audits relating to taxes of Company pending or in process or, to the knowledge of Company, threatened. Company is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Company. Company has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Company nor any predecessor of Company is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Company has delivered to Pentegra correct and complete copies of Company's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Company during the three calendar year period preceding the date of this Agreement. Company has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) No Shareholder presently intends to dispose of any of the shares of Pentegra Common Stock to be received hereunder nor is a party to any plan, arrangement or agreement for the disposition of such shares. Company and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Shareholders from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Company or Company's shareholders resulting from any action taken by Company or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Company or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Company (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed professional of Company carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Company have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Company, nor any Shareholder nor any licensed professional employee of Company has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Company has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company Plan," and collectively "Company Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Company has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Company Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Company Plans. Company has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Company Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Company, any Shareholder or any licensed professional employee of Company of any Federal, state or local law or regulation. Company and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Company. 2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed professional employee or independent contractor of Company has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Company, any Shareholder and each licensed professional employee of Company. Neither Company, nor any Shareholder, nor any licensed professional employee of Company has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Company, Shareholders and Company's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Company or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Company has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Company, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Company or any organization that has a material contract or arrangement with Company. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Company's services which accounted for more than 10% of revenues of Company in the preceding fiscal year. Company has good relations with all such payors and other material payors of Company and none of such payors has notified Company that it intends to discontinue its relationship with Company or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Company and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the reorganization contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the reorganization contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Company or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Company and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the Business and use the Assets in the ordinary course. Company and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Company and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Company and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Company. Company and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Company and Shareholdes shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Company, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Company, the Business or the Assets as Pentegra or its representatives may request. Company and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Company is a party or relating to the Business or the Assets, and (b) any adverse change in Company's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Company and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Company and Shareholders shall not, and shall use its best efforts to cause Company's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Company or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Company and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Company and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Company or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Company to any employee or other person or entity (including, without limitation, any Company Plan and any liability under employment contracts with Company) allocable to services performed prior to the Closing Date. Company and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Company's employees or similar persons or entities, including, without limitation, any Company Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Company shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Company, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Company, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Company, nor will any repurchase of any of Company's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the reorganization contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Company (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Company and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Company required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Company hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Company and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Company prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Company and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Company and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Company leases any of its premises from any Shareholder or other affiliate of Company or any shareholder of Company, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dentist employees of Company designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Company and Shareholders shall remain liable under any Company Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Company's employees incurred by Company prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Company and shall be treated as Clinic employees for purposes of eligibility and participation in Company Plans. 4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the practice of dentistry is conducted by the Shareholders and the Practice. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Shareholders shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. The Company shall have transferred the Excluded Assets set forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for equity interest in the Practice, and the Company shall have distributed such equity interests in the Practice to the Shareholders. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and have filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS. Pentegra, Shareholders and Company agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Company and Shareholders shall furnish all information concerning Company and Shareholders as may be reasonable requested in connection with any such action. Company and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Company and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Company and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Company and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Company and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Company, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Each Shareholder shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused each shareholder of Company that has an existing employment agreement with Company to have terminated his or her employment agreement with Company and shall have executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Company and Pentegra. 7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Company and its shareholders or affiliates and Company shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Company since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Company and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Company shall have received all documents, duly executed in form satisfactory to Company and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days after requested by Pentegra, Company and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Company authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) executed merger certificate and/or plan as required by applicable state law; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra and the original stock certificates together with blank stock powers representing the outstanding shares of Company common stock; (f) certificates of the Shareholders and a duly authorized officer of Company dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Company and Shareholder contained herein; (ii) as to the performance of and compliance by Company and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Company and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Company certifying as to the incumbency of the directors and officers of Company and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Company; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Company and any state of required foreign qualification of Company establishing that Company is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Company and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Company, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Company; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Company and Shareholders, the following, all of which shall be in a form satisfactory to counsel to Company and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Merger Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Company; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Company; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Company to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Company and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Company or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Company or any Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Company or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Company or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Company or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Company if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Company, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Company pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Company pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Each Shareholder covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Company resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Company and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Company or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Company and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Company and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Company and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Company and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement will qualify as a reorganization within the meaning of Section 368(a) of the Code. The tax returns (and schedules thereto) of Shareholders, Company and Pentegra shall be filed in a manner consistent with such intention and Shareholders and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Company and Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Company or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Company. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Company, be relieved from its obligations to Company under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Company, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Company and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Company or may demand from Company, and Company agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Companys or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. LAKEVIEW DENTAL, P.C. By: /s/ Kevin Gasser, D.D.S. --------------------------------------- Kevin Gasser, D.D.S., President PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman --------------------------------------- Its: Senior VP -------------------------------------- /s/ Kevin Gasser, D.D.S. ------------------------------------------ Kevin Gasser, D.D.S. INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Merger Consideration A Target Companies 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 4.16 Excluded Assets and Excluded Liabilities 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.30 26 EXHIBIT 2.30 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., AND DONALD W. LANNING, D.D.S. TABLE OF CONTENTS
PAGE ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. 2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . 3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . . 3 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . . 3 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . . 7 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . . 8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . . 8 3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 4. COVENANTS OF DENTIST. 4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 9 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . . 9 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . . 10 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 10 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . . 10 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . . 11 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 11 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 11 Section 6. COVENANTS OF PENTEGRA AND DENTIST 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 12 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . . 12 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . 12 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . . 13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . 13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 8. DENTIST'S CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 13 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . . . . . . . 16 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . 17 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . . 19 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . 21 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . 21 14.12 NO RULE OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.15 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.16 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra") and Donald W. Lanning, D.D.S. ("Dentist"). WITNESSETH: WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires to receive from Dentist, certain assets of Dentist; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Dentist, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Dentist shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Dentist's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Dentist shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Dentist contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Dentist the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Dentist, including, but not limited to, liabilities arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by Dentist, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Dentist reflected on the books of Dentist at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Dentist, any licensed professional employee or independent contractor of Dentist, (vi) any liability for the payment of any taxes of Dentist, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Dentist. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Dentist shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. Dentist hereby represents and warrants to Pentegra as follows: 2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the State of Texas. Dentist does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Dentist and constitute or will constitute the legal, valid and binding obligations of Dentist in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Dentist is a party or by which Dentist is bound, or violate any material restrictions of any kind to which Dentist is subject, or result in any lien or encumbrance on any of Dentist's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All material building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Dentist, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Dentist. 2.5 [INTENTIONALLY DELETED]. 2.6 [INTENTIONALLY DELETED]. 2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Dentist as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Dentist. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Dentist leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Dentist, as lessor or lessee, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Dentist has not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Dentist has no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. Pentegra acknowledges that it has acquired the assets "where and as is" relying solely upon Pentegra's own examination. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Dentist, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Dentist has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Dentist, including the names of any entities from whom Dentist previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Dentist in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Dentist has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the most recent payroll report of Dentist, showing all current employees of Dentist and their current levels of compensation, (b) promised increases in compensation of employees of Dentist that have not yet been effected, (c) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Dentist is a party, copies of which have been delivered to Pentegra, and (d) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Dentist is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Dentist has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Dentist, and Dentist has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Except as set forth on Exhibit 2.16, neither Dentist nor the Business nor any of the Assets is subject to any pending, nor does Dentist have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Dentist, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Dentist, no basis for any such action exists, nor is there any legal impediment of which Dentist has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Dentist ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Dentist, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default. Dentist has no knowledge of any default by any other party to such Contracts. Dentist has not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Dentist, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Dentist on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement, other than in the course of business; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (d) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (e) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Dentist since the Balance Sheet Date; (f) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (g) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (h) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (i) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (j) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (k) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; or (l) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports and other statements) required to have been filed by it or have been properly extended, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Dentist has not received any notice that any tax deficiency or delinquency has been or may be asserted against Dentist. There are no audits relating to taxes of Dentist pending or in process or, to the knowledge of Dentist, threatened. Dentist is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Dentist. Dentist has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Dentist nor any predecessor of Dentist is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Dentist has delivered to Pentegra correct and complete copies of Dentist's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Dentist during the three calendar year period preceding the date of this Agreement. Dentist has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Dentist does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Nothing contained herein shall prohibit Dentist from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Dentist resulting from any action taken by Dentist or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any material liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Dentist does not know, or have reasonable grounds to know, of any basis for the assertion against Dentist as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Dentist (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Dentist has not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Dentist nor any licensed professional employee of Dentist has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Dentist has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. To the best of the Dentist's knowledge, no act or failure to act by Dentist has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Dentist Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Dentist Plans. Dentist has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Dentist Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Dentist or any licensed professional employee of Dentist of any Federal, state or local law or regulation. Dentist has not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Dentist. 2.24 THIRD PARTY PAYORS. Dentist and each licensed professional employee or independent contractor of Dentist has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Dentist and each licensed professional employee of Dentist. Neither Dentist nor any licensed professional employee of Dentist has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Dentist and Dentist's licensed professional employees have not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by Dentist or to be furnished by Dentist to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Dentist has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or employee (or their respective spouses, children or affiliates) owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Dentist or any organization that has a material contract or arrangement with Dentist. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Dentist's services which accounted for more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has good relations with all such payors and other material payors of Dentist and none of such payors has notified Dentist that it intends to discontinue its relationship with Dentist or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Dentist as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Pentegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF DENTIST. Dentist agrees that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Dentist agrees to complete the Exhibits hereto to be provided by him in form and substance satisfactory to both Dentist and Pentegra. 4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the Assets in the ordinary course. Dentist shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Dentist shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Dentist shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Dentist. Dentist shall collect its receivables and pay its trade payables in the ordinary course of business. Dentist shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Dentist, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Dentist, the Business or the Assets as Pentegra or its representatives may request. Dentist shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Dentist is a party or relating to the Business or the Assets, and (b) any adverse change in Dentist's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall use his best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Dentist shall not, and shall use its best efforts to cause Dentist's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to the Dentist, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Dentist or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Dentist will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Dentist shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Dentist or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Dentist to any employee or other person or entity (including, without limitation, any Dentist Plan and any liability under employment contracts with Dentist) allocable to services performed prior to the Closing Date. Dentist acknowledges that the purpose and intent of this covenant is to assure that Pentegra shall have no liability whatsoever at any time after the Closing Date with respect to any of Dentist's employees or similar persons or entities, including, without limitation, any Dentist Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of the Dentist (other than in the ordinary course of business) or other employee or an independent contractor of Dentist, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Dentist, its business, assets or prospects. 4.8 [INTENTIONALLY OMITTED]. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material respect the tax or financial accounting methods or practices followed by Dentist (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Dentist will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Dentist required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Dentist covenants and agrees that all of the creditors with respect to the Business and the Assets will be paid in full by Dentist prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Dentist may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Dentist agrees to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Dentist leases any of its premises from the Dentist or other affiliate of Dentist, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Dentist employed by the Dentist as of the Closing Date with, such employment to be effective as of the Closing Date. Notwithstanding the above, Dentist shall remain liable under any Dentist Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Dentist's employees incurred by Dentist prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and shall be treated as Clinic employees for purposes of eligibility and participation in Dentist Plans. 4.15 INSURANCE. Dentist shall agree to have and shall assist Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited liability company, partnership or other legal entity (the "Practice") for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the Dentist and the Practice are to practice dentistry. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Dentist shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall qualify to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice on the Closing Date and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and has filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra and Dentist agree to complete the Exhibits hereto to be provided by both parties. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND DENTIST. Pentegra and Dentist agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Dentist shall furnish all information concerning Dentist as may be reasonable requested in connection with any such action. Dentist represents and warrants that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Dentist shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Dentist shall furnish Pentegra will all information concerning itself and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Dentist contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Dentist prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Dentist, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a mutually agreeable Service Agreement (the "Service Agreement"), which may be in the form attached hereto as EXHIBIT 7.7, and otherwise satisfactory to Dentist and Pentegra, pursuant to which Pentegra will provide management services to the Practice. Dentist shall have executed and delivered a mutually agreeable Guaranty Agreement which may be in the form attached as EXHIBIT 4.10, and otherwise satisfactory to Dentist and Pentegra, of the Service Agreement pursuant to which Dentist shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her employment agreement and executed an mutually agreeable employment agreement ("Employment Agreement") with the Practice which may be in the form attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra. 7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Dentist and its affiliates and Dentist shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured on its liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Dentist since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. DENTIST'S CONDITIONS PRECEDENT. The obligations of Dentist hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly executed in form satisfactory to Dentist and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF DENTIST. On or before the Closing Date, Dentist shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a bill of sale conveying the Assets to Pentegra; (d) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (e) certificates of Dentist dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Dentist contained herein; (ii) as to the performance of and compliance by Dentist with all covenants contained herein; and (iii) certifying that all conditions precedent of Dentist to the Closing have been satisfied; (f) an opinion of counsel to Dentist opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Dentist, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (g) non-foreign affidavits executed by Dentist; (h) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (i) an executed Registration Rights Agreement between Pentegra and Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (j) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Dentist the following, all of which shall be in a form satisfactory to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Dentist; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Dentist; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Dentist to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Dentist or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. (D) ANY LIABILITY OF PENTEGRA FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEY'S FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Dentist giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Dentist contained in this Agreement or in any certificate or other document executed and delivered by Dentist pursuant to this Agreement is or becomes untrue or breached in any material respect or if Dentist fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Dentist if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra or Dentist if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Dentist, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received as consideration by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, received by any party hereunder as consideration, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, received by any party hereunder as consideration, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Dentist pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the shares of Pentegra Common Stock to be delivered to Dentist pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Dentist covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Dentist resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect its own interests in connection with the acquisition of the Pentegra Common Stock. Dentist and its representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Dentist and its representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Dentist is an "accredited investor" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes and acknowledges that it had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is a valuable, special and unique asset of Pentegra's businesses. Dentist agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Dentist, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Dentist shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Dentist reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Dentist is the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Dentist from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. Pentegra recognizes and acknowledges that it had in the past, currently have, and in the future may possibly have, access to certain confidential information of Dentist that is a valuable, special and unique asset of Dentist. Pentegra agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Pentegra, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Pentegra shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Pentegra reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Pentegra is the sole and exclusive owner of such confidential information as a result of the transaction contemplated hereunder or otherwise. In the event of a breach or threatened breach by Pentegra of the provision of this SECTION 13. Dentist shall be entitled to an injunction restraining Pentegra from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Dentist and Pentegra shall be filed in a manner consistent with such intention and Dentist and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Dentist: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Dentist for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Dentist. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF TEXAS AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS AND THE ESCROW LETTER ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Dentist, be relieved from its obligations to Dentist under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Dentist, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoenix, Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. PENTEGRA DENTAL GROUP, INC. By: /s/ James L. Dunn, Jr. ------------------------------------- Its: Senior Vice President ------------------------------------- /s/ Donald W. Lanning, D.D.S. ---------------------------------------- Donald W. Lanning, D.D.S. INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 [intentionally omitted] 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice
EX-2.31 27 EXHIBIT 2.31 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., and David A. Little, D.D.S. TABLE OF CONTENTS
Page ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. 2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 3 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 3 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 7 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 7 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 8 3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 4. COVENANTS OF DENTIST. 4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 9 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 9 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 9 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . 10 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 10 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 10 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . . . . 10 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 11 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 11 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 11 Section 6. COVENANTS OF PENTEGRA AND DENTIST 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 12 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 12 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 12 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 12 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 8. DENTIST'S CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 13 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . . . . . . 16 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 17 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 18 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 19 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . . 20 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . 21 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . 21 14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . 21 14.12 NO RULE OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . 21 14.13 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.14 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.15 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.16 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.17 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra") and David A. Little, D.D.S. ("Dentist"). WITNESSETH: WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires to receive from Dentist, certain assets of Dentist; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Dentist, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Dentist shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Dentist's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Dentist shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Dentist contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Dentist the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Dentist, including, but not limited to, liabilities arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by Dentist, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Dentist reflected on the books of Dentist at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Dentist, any licensed professional employee or independent contractor of Dentist, (vi) any liability for the payment of any taxes of Dentist, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Dentist. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Dentist shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. Dentist hereby represents and warrants to Pentegra as follows: 2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the State of TEXAS. Dentist does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Dentist and constitute or will constitute the legal, valid and binding obligations of Dentist in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Dentist is a party or by which Dentist is bound, or violate any material restrictions of any kind to which Dentist is subject, or result in any lien or encumbrance on any of Dentist's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Dentist, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Dentist. 2.5 [INTENTIONALLY DELETED]. 2.6 [INTENTIONALLY DELETED]. 2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Dentist as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Dentist. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Dentist leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Dentist, as lessor or lessee, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Dentist has not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Dentist has no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Dentist, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Dentist has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Dentist, including the names of any entities from whom Dentist previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Dentist in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Dentist has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the most recent payroll report of Dentist, showing all current employees of Dentist and their current levels of compensation, (b) promised increases in compensation of employees of Dentist that have not yet been effected, (c) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Dentist is a party, copies of which have been delivered to Pentegra, and (d) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Dentist is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Dentist has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Dentist, and Dentist has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the Assets is subject to any pending, nor does Dentist have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Dentist, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Dentist, no basis for any such action exists, nor is there any legal impediment of which Dentist has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Dentist ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Dentist, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default. Dentist has no knowledge of any default by any other party to such Contracts. Dentist has not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Dentist, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Dentist on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (d) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (e) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Dentist since the Balance Sheet Date; (f) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (g) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (h) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (i) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (j) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (k) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; or (l) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Dentist has not received any notice that any tax deficiency or delinquency has been or may be asserted against Dentist. There are no audits relating to taxes of Dentist pending or in process or, to the knowledge of Dentist, threatened. Dentist is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Dentist. Dentist has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Dentist nor any predecessor of Dentist is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Dentist has delivered to Pentegra correct and complete copies of Dentist's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Dentist during the three calendar year period preceding the date of this Agreement. Dentist has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Dentist does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Nothing contained herein shall prohibit Dentist from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Dentist resulting from any action taken by Dentist or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Dentist does not know, or have reasonable grounds to know, of any basis for the assertion against Dentist as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Dentist (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Dentist has not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Dentist nor any licensed professional employee of Dentist has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Dentist has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Dentist has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Dentist Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Dentist Plans. Dentist has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Dentist Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Dentist or any licensed professional employee of Dentist of any Federal, state or local law or regulation. Dentist has not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Dentist. 2.24 THIRD PARTY PAYORS. Dentist and each licensed professional employee or independent contractor of Dentist has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Dentist and each licensed professional employee of Dentist. Neither Dentist nor any licensed professional employee of Dentist has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Dentist and Dentist's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by Dentist or to be furnished by Dentist to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Dentist has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or employee or family member of Dentist, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Dentist or any organization that has a material contract or arrangement with Dentist. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Dentist's services which accounted for more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has good relations with all such payors and other material payors of Dentist and none of such payors has notified Dentist that it intends to discontinue its relationship with Dentist or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Dentist as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Pentegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF DENTIST. Dentist agrees that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Dentist agrees to complete the Exhibits hereto to be provided by him in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the Assets in the ordinary course. Dentist shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Dentist shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Dentist shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Dentist. Dentist shall collect its receivables and pay its trade payables in the ordinary course of business. Dentist shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Dentist, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Dentist, the Business or the Assets as Pentegra or its representatives may request. Dentist shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Dentist is a party or relating to the Business or the Assets, and (b) any adverse change in Dentist's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall use his best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Dentist shall not, and shall use its best efforts to cause Dentist's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to the Dentist, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Dentist or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Dentist will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Dentist shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Dentist or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Dentist to any employee or other person or entity (including, without limitation, any Dentist Plan and any liability under employment contracts with Dentist) allocable to services performed prior to the Closing Date. Dentist acknowledges that the purpose and intent of this covenant is to assure that Pentegra shall have no liability whatsoever at any time after the Closing Date with respect to any of Dentist's employees or similar persons or entities, including, without limitation, any Dentist Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of the Dentist (other than in the ordinary course of business) or other employee or an independent contractor of Dentist, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Dentist, its business, assets or prospects. 4.8 [INTENTIONALLY OMITTED]. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material respect the tax or financial accounting methods or practices followed by Dentist (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Dentist will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Dentist required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Dentist covenants and agrees that all of the creditors with respect to the Business and the Assets will be paid in full by Dentist prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Dentist may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Dentist agrees to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Dentist leases any of its premises from the Dentist or other affiliate of Dentist, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Dentist designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Dentist shall remain liable under any Dentist Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Dentist's employees incurred by Dentist prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and shall be treated as Clinic employees for purposes of eligibility and participation in Dentist Plans. 4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the Dentist and the Practice are to practice dentistry. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Dentist shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and has filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND DENTIST. Pentegra and Dentist agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Dentist shall furnish all information concerning Dentist as may be reasonable requested in connection with any such action. Dentist represents and warrants that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Dentist shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Dentist shall furnish Pentegra will all information concerning itself and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Dentist contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Dentist prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Dentist, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Dentist shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Dentist shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her employment agreement and executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra. 7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Dentist and its affiliates and Dentist shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured on its liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Dentist since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. DENTIST'S CONDITIONS PRECEDENT. The obligations of Dentist hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly executed in form satisfactory to Dentist and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC on or before December 31, 1997. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF DENTIST. Within five business days after requested by Pentegra, Dentist shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a bill of sale conveying the Assets to Pentegra; (d) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (e) certificates of Dentist dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Dentist contained herein; (ii) as to the performance of and compliance by Dentist with all covenants contained herein; and (iii) certifying that all conditions precedent of Dentist to the Closing have been satisfied; (f) an opinion of counsel to Dentist opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Dentist, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (g) non-foreign affidavits executed by Dentist; (h) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (i) an executed Registration Rights Agreement between Pentegra and Dentist, in substantially the form attached hereto as EXHIBIT 9.1(L) (the "Registration Rights Agreement"); and (j) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Dentist the following, all of which shall be in a form satisfactory to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Dentist; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Dentist; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Dentist to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Dentist or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Dentist giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. In the event of any breach of warranty, representation, covenant or agreement by Pentegra giving rise to indemnification under Section 10.2 or Section 10.4 hereof, Dentist shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Dentist, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Dentist contained in this Agreement or in any certificate or other document executed and delivered by Dentist pursuant to this Agreement is or becomes untrue or breached in any material respect or if Dentist fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Dentist if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra or Dentist if the transaction contemplated (including the Initial Public Offering) hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Dentist, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Dentist pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the shares of Pentegra Common Stock to be delivered to Dentist pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Dentist covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Dentist resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect its own interests in connection with the acquisition of the Pentegra Common Stock. Dentist and its representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Dentist and its representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Dentist is an "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes and acknowledges that it had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Dentist agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Dentist, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Dentist shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Dentist reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Dentist is the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Dentist from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Dentist and Pentegra shall be filed in a manner consistent with such intention and Dentist and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Dentist: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Dentist for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Dentist. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Dentist, be relieved from its obligations to Dentist under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Dentist, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoenix, Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. PENTEGRA DENTAL GROUP, INC. By: /s/ James L. Dunn, Jr. -------------------------------- Its: Senior Vice President -------------------------------- /s/ David A. Little, D.D.S. ------------------------------------ David A. Little, D.D.S. INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 [intentionally omitted] 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.32 28 EXHIBIT 2.32 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., SUSAN E. LUNSON, D.D.S., P.C. AND SUSAN E. LUNSON, D.D.S. TABLE OF CONTENTS
Page ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . .1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . .2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . .2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . .3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . .3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . .3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . .3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . .4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . .4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . .4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . .8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . .8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . .8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . .9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . .9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . .9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 12 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 12 Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 13 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 13 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 13 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 14 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 14 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS . . . . . . . . . . . . . 17 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 18 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 19 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 20 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . 21 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . 21 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . 21 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . 22 14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), Susan E. Lunson, D.D.S., P.C. ("Contributor") and Susan E. Lunson, D.D.S., shareholders of Contributor (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Contributor operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra desires to receive from Contributor, certain assets of Contributor; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Contributor, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Contributor shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Contributor's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Contributor shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Contributor contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Contributor the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Contributor listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Contributor, including, but not limited to, liabilities arising under any Contributor Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by any Shareholder or Contributor, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Contributor reflected on the books of Contributor at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Contributor, any licensed professional employee or independent contractor of Contributor or any Shareholder, (vi) any liability for the payment of any taxes of Contributor or any Shareholder, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Contributor or any Shareholder. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, Contributor and Shareholders shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS. Contributor and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Contributor is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Texas. Contributor has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Contributor does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Contributor a party to any joint venture or partnership. The Shareholders are the sole shareholders of Contributor and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Contributor's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Contributor are owned by Contributor in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Contributor on any matter, (b) securities of Contributor convertible into equity interests in Contributor, or (c) commitments, options, rights or warrants to issue any such equity interests in Contributor, to issue securities of Contributor convertible into such equity interests, or to redeem any securities of Contributor. No shares of capital stock of Contributor have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Contributor's stockholders. Contributor is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Contributor does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Contributor has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Contributor and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Contributor and Shareholders, enforceable against Contributor and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Contributor or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Contributor or any Shareholder is a party or by which Contributor or any Shareholder is bound, or violate any material restrictions of any kind to which Contributor is subject, or result in any lien or encumbrance on any of Contributor's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Contributor and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Contributor or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Contributor on any of its capital stock since the Balance Sheet Date. No repurchase of any of Contributor's capital stock has been approved, effected or is pending, or is contemplated by Contributor. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Contributor and all amendments thereto have been delivered to Pentegra. The minute books of Contributor contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Contributor since its formation. The books of account of Contributor have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Contributor have been properly recorded in such books. 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Contributor as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Contributor. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Contributor or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Contributor, as lessor or lessee, or any condition or event of which any Shareholder or Contributor has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Contributor or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Contributor and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Contributor, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Contributor has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Contributor, including the names of any entities from whom Contributor previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Contributor is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Contributor in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Contributor has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Contributor and the offices held by each, (b) the most recent payroll report of Contributor, showing all current employees of Contributor and their current levels of compensation, (c) promised increases in compensation of employees of Contributor that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Contributor is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Contributor is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Contributor has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Contributor, and Contributor has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Contributor nor the Business nor any of the Assets is subject to any pending, nor does Contributor or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Contributor, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Contributor and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Contributor or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Contributor ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Contributor or any Shareholder, or any condition or event of which Contributor or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Contributor and Shareholders have no knowledge of any default by any other party to such Contracts. Contributor and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Contributor are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Contributor or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Contributor on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Contributor has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Contributor since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Contributor; (o) Repurchased, approved any repurchase or agreed to repurchase any of Contributor's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Contributor has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Contributor has not received any notice that any tax deficiency or delinquency has been or may be asserted against Contributor. There are no audits relating to taxes of Contributor pending or in process or, to the knowledge of Contributor, threatened. Contributor is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Contributor. Contributor has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Contributor nor any predecessor of Contributor is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Contributor has delivered to Pentegra correct and complete copies of Contributor's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Contributor during the three calendar year period preceding the date of this Agreement. Contributor has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Contributor does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Contributor and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Contributor from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Contributor or Contributor's shareholders resulting from any action taken by Contributor or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Contributor did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Contributor and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Contributor or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Contributor (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Contributor, each Shareholder and each licensed professional of Contributor carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Contributor have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Contributor, nor any Shareholder nor any licensed professional employee of Contributor has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Contributor has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Contributor Plan," and collectively "Contributor Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Contributor has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Contributor Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Contributor Plans. Contributor has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Contributor Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Shareholders and Contributor's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Contributor, any Shareholder or any licensed professional employee of Contributor of any Federal, state or local law or regulation. Contributor and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Contributor. 2.24 THIRD PARTY PAYORS. Contributor, Shareholders and each licensed professional employee or independent contractor of Contributor has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Contributor, any Shareholder and each licensed professional employee of Contributor. Neither Contributor, nor any Shareholder, nor any licensed professional employee of Contributor has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Contributor, Shareholders and Contributor's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Contributor or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Contributor or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Contributor has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Contributor, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Contributor or any organization that has a material contract or arrangement with Contributor. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Contributor's services which accounted for more than 10% of revenues of Contributor in the preceding fiscal year. Contributor has good relations with all such payors and other material payors of Contributor and none of such payors has notified Contributor that it intends to discontinue its relationship with Contributor or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Contributor and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Pentegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Contributor or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS. Contributor and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Contributor and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Contributor and Shareholders shall operate the Business and use the Assets in the ordinary course. Contributor and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Contributor and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Contributor and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Contributor. Contributor and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Contributor and Shareholders shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Contributor and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Contributor, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Contributor, the Business or the Assets as Pentegra or its representatives may request. Contributor and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Contributor is a party or relating to the Business or the Assets, and (b) any adverse change in Contributor's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Contributor and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of Contributor contemplated by the Service Agreement and to conduct the intended business of Contributor and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Contributor and Shareholders shall not, and shall use its best efforts to cause Contributor's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Contributor or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Contributor and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Contributor and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Contributor or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Contributor to any employee or other person or entity (including, without limitation, any Contributor Plan and any liability under employment contracts with Contributor) allocable to services performed prior to the Closing Date. Contributor and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Contributor's employees or similar persons or entities, including, without limitation, any Contributor Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Contributor, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Contributor, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Contributor, nor will any repurchase of any of Contributor's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Contributor and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Contributor (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Contributor and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Contributor required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Contributor hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Contributor and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Contributor prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Contributor and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Contributor and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Contributor and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Contributor leases any of its premises from any Shareholder or other affiliate of Contributor or any shareholder of Contributor, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Contributor and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Contributor designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Contributor and Shareholders shall remain liable under any Contributor Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Contributor's employees incurred by Contributor prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that all employees of Contributor hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Contributor and shall be treated as Clinic employees for purposes of eligibility and participation in Contributor Plans. 4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS. Pentegra, Shareholders and Contributor agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Contributor and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Contributor and Shareholders shall furnish all information concerning Contributor and Shareholders as may be reasonable requested in connection with any such action. Contributor and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Contributor and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Contributor and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Contributor and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Contributor and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Contributor and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Contributor, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Contributor. Each Shareholder shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of Contributor under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and caused each shareholder of Contributor that has an existing employment agreement with Contributor to have terminated his or her employment agreement with Contributor and shall have executed an employment agreement ("Employment Agreement") with Contributor in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Contributor and Pentegra. 7.9 CONSENTS AND APPROVALS. Contributor and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Contributor and its shareholders or affiliates and Contributor shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Contributor and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Contributor since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Contributor and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Contributor shall have received all documents, duly executed in form satisfactory to Contributor and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. Within five business days after requested by Pentegra, Contributor and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Contributor authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) a bill of sale conveying the Assets to Pentegra; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (f) certificates of the Shareholders and a duly authorized officer of Contributor dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Contributor and Shareholder contained herein; (ii) as to the performance of and compliance by Contributor and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Contributor and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Contributor certifying as to the incumbency of the directors and officers of Contributor and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Contributor; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Contributor and any state of required foreign qualification of Contributor establishing that Contributor is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Contributor and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Contributor, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Contributor; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Contributor, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Contributor and Shareholder, the following, all of which shall be in a form satisfactory to counsel to Contributor and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Contributor; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Contributor; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Contributor to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Contributor and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD CONTRIBUTOR AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING CONTRIBUTOR AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. CONTRIBUTOR AND SHAREHOLDERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY CONTRIBUTOR OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE CONTRIBUTOR OR SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF CONTRIBUTOR OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF CONTRIBUTOR OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE CONTRIBUTOR OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Contributor or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Contributor or Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Contributor or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Contributor or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Contributor or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Contributor if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Contributor, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Contributor shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Contributor pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Contributor pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Contributor pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Contributor covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Contributor resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Contributor, Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Contributor, Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Contributor and Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Contributor and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Contributor or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Contributor and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Contributor and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Contributor and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Contributor or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Contributor and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Shareholders, Contributor and Pentegra shall be filed in a manner consistent with such intention and Contributor and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Contributor or Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Contributor or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Contributor. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF CONTRIBUTOR AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Contributor, be relieved from its obligations to Contributor under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Contributor, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Contributor and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Contributor or may demand from Contributor, and Contributor agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Contributors or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoenix, Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. Susan E. Lunson, D.D.S., P.C. By: /s/ Susan E. Lunson, D.D.S. -------------------------------------- Its: Pres./Sec. -------------------------------------- PENTEGRA DENTAL GROUP, INC. By: /s/ James L. Dunn, Jr. -------------------------------------- Its: Senior Vice President -------------------------------------- /s/ Susan E. Lunson, D.D.S. ------------------------------------------ Susan E. Lunson, D.D.S. INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.33 29 EXHIBIT 2.33 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., RICHARD W. MAINS, JR., D.M.D., P.C. and RICHARD W. MAINS, JR., D.M.D. TABLE OF CONTENTS Page ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . 3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . 8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . .10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . .10 Section 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . .10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . .10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . .10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . .10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . .10 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . .11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . .11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . .11 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . .11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . .11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . .11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . .12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . .12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . .12 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . .12 Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . .12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . .13 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . .13 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . .13 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . .13 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . .13 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . .13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . .13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . .13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . .13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . .13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . .13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . .14 Section 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . .14 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . .14 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . .14 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . .14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . . . .14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . .15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . .16 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . .16 10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS . . . . . . . . . . .17 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . .18 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . .18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . .19 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . .19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . .20 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . .21 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . .21 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . .21 14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . .21 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . .21 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . .22 14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . .22 14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . .22 14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), RICHARD W. MAINS, D.M.D., JR., P.C., a New York professional corporation ("Contributor") and RICHARD W. MAINS, D.M.D., JR., shareholder of Contributor (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Contributor operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra desires to receive from Contributor, certain assets of Contributor; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Contributor, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. . NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., or in such other manner as is mutually agreed upon by the parties, on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Contributor shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Contributor's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Contributor shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Contributor contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Contributor the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Contributor listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Contributor, including, but not limited to, liabilities arising under any Contributor Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by any Shareholder or Contributor which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Contributor reflected on the books of Contributor at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Contributor, any licensed professional employee or independent contractor of Contributor or any Shareholder, (vi) any liability for the payment of any taxes of Contributor or any Shareholder, including without limitation, transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Contributor or any Shareholder. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, Contributor and Shareholders shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS. Contributor and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Contributor is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of New York. Contributor has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Contributor does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Contributor a party to any joint venture or partnership. The Shareholders are the sole shareholders of Contributor and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Contributor's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Contributor are owned by Contributor in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Contributor on any matter, (b) securities of Contributor convertible into equity interests in Contributor, or (c) commitments, options, rights or warrants to issue any such equity interests in Contributor, to issue securities of Contributor convertible into such equity interests, or to redeem any securities of Contributor. No shares of capital stock of Contributor have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Contributor's stockholders. Contributor is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Contributor does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Contributor has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Contributor and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Contributor and Shareholders, enforceable against Contributor and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Contributor or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Contributor or any Shareholder is a party or by which Contributor or any Shareholder is bound, or violate any material restrictions of any kind to which Contributor is subject, or result in any lien or encumbrance on any of Contributor's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Contributor and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Contributor or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Contributor on any of its capital stock since the Balance Sheet Date. No repurchase of any of Contributor's capital stock has been approved, effected or is pending, or is contemplated by Contributor. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Contributor and all amendments thereto have been delivered to Pentegra. The minute books of Contributor contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Contributor since its formation. The books of account of Contributor have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Contributor have been properly recorded in such books. 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Contributor as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Contributor. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Contributor or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business or related to the Assets. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Contributor, as lessor or lessee, or any condition or event of which any Shareholder or Contributor has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Contributor or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Contributor and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Contributor, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Contributor has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Contributor, including the names of any entities from whom Contributor previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Contributor is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Contributor in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Contributor has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Contributor and the offices held by each, (b) the most recent payroll report of Contributor, showing all current employees of Contributor and their current levels of compensation, (c) promised increases in compensation of employees of Contributor that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Contributor is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Contributor is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Contributor has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Contributor, and Contributor has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Contributor nor the Business nor any of the Assets is subject to any pending, nor does Contributor or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Contributor, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Contributor and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Contributor or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Contributor ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Contributor or any Shareholder, or any condition or event of which Contributor or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default by Contributor. Contributor and Shareholders have no knowledge of any default by any other party to such Contracts. Contributor and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Contributor are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Contributor or Shareholders, oral or written, that provide for prepayments or deferred installment payments (other than in the ordinary course of business consistent with past practices); or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Contributor on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Contributor has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Contributor since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Contributor; (o) Repurchased, approved any repurchase or agreed to repurchase any of Contributor's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Contributor has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Contributor has not received any notice that any tax deficiency or delinquency has been or may be asserted against Contributor. There are no audits relating to taxes of Contributor pending or in process or, to the knowledge of Contributor, threatened. Contributor is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Contributor. Contributor has withheld and paid all taxes required by law to have been withheld and paid by it. Contributor is not and has not been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Contributor has delivered to Pentegra correct and complete copies of Contributor's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Contributor during the three calendar year period preceding the date of this Agreement. Contributor has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Contributor does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Contributor and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Contributor from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Contributor or Contributor's shareholders resulting from any action taken by Contributor or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet or as set forth on EXHIBIT 2.19, Contributor did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business. Contributor and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Contributor or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Contributor (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is included on the Balance Sheet or is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Contributor, each Shareholder and each licensed professional of Contributor carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Contributor have not received notice or other communication from the issuer of any such insurance policy canceling or amending such policy or threatening to do so. Neither Contributor, nor any Shareholder nor any licensed professional employee of Contributor has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Contributor has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Contributor Plan," and collectively "Contributor Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Contributor has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Contributor Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Contributor Plans. Contributor has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Contributor Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Shareholders and Contributor's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Contributor, any Shareholder or any licensed professional employee of Contributor of any Federal, state or local law or regulation. Contributor and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Contributor. 2.24 THIRD PARTY PAYORS. Contributor, Shareholders and each licensed professional employee or independent contractor of Contributor has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Contributor, any Shareholder and each licensed professional employee of Contributor. Neither Contributor, nor any Shareholder, nor any licensed professional employee of Contributor has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Contributor, Shareholders and Contributor's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Contributor or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Contributor or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Contributor has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, director or stockholder of Contributor, or their respective spouses, children or affiliates, and to the best of Contributor's knowledge, no employee of Contributor, or such employee's respective spouse, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Contributor or any organization that has a material contract or arrangement with Contributor. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Contributor's services which accounted for more than 10% of revenues of Contributor in the preceding fiscal year. Contributor has good relations with all such payors and other material payors of Contributor and none of such payors has notified Contributor that it intends to discontinue its relationship with Contributor or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Contributor and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Pentegra or waivers thereof in all jurisdictions where Pentegra is or will perform services, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Contributor or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS. Contributor and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Contributor and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Contributor and Shareholders shall operate the Business and use the Assets in the ordinary course. Contributor and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Contributor and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have a material adverse effect on the Business or Assets. Contributor and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Contributor. Contributor and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Contributor and Shareholdes shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Contributor and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Contributor, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Contributor, the Business or the Assets as Pentegra or its representatives may request. Contributor and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Contributor is a party or relating to the Business or the Assets, and (b) any adverse change in Contributor's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Contributor and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of Contributor contemplated by the Service Agreement and to conduct the intended business of Contributor and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Contributor and Shareholders shall not, and shall use its best efforts to cause Contributor's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Contributor or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Contributor and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Contributor and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Contributor or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Contributor to any employee or other person or entity (including, without limitation, any Contributor Plan and any liability under employment contracts with Contributor) allocable to services performed prior to the Closing Date. Contributor and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Contributor's employees or similar persons or entities, including, without limitation, any Contributor Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Contributor, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Contributor, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Contributor, nor will any repurchase of any of Contributor's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Contributor and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Contributor (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Contributor and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Contributor required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Contributor hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Contributor and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Contributor prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Contributor and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Contributor and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Contributor and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Contributor leases any of its premises from any Shareholder or other affiliate of Contributor or any shareholder of Contributor, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Contributor and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Contributor designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Contributor and Shareholders shall remain liable under any Contributor Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Contributor's employees incurred by Contributor prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that all employees of Contributor hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Contributor and shall be treated as Clinic employees for purposes of eligibility and participation in Contributor Plans. 4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS. Pentegra, Shareholders and Contributor agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, at its sole cost and expense, shall cooperate to promptly prepare and file with the Securities and Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra, at its sole cost and expense, shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Contributor and Shareholders shall furnish all information concerning Contributor and Shareholders as may be reasonable requested in connection with any such action. Contributor and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Contributor and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Contributor and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. 6.2 SALES TAX. Notwithstanding any provision herein to the contrary, Pentegra hereby covenants and agrees to pay any and all sales and/or use taxes due and owing as a result of the transactions contemplated by this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Contributor and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Contributor and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Contributor and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Contributor, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Contributor. Each Shareholder shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of Contributor under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and caused each shareholder of Contributor that has an existing employment agreement with Contributor to have terminated his or her employment agreement with Contributor and shall have executed an employment agreement ("Employment Agreement") with Contributor in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Contributor and Pentegra. 7.9 CONSENTS AND APPROVALS. Contributor and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Contributor and its shareholders or affiliates and Contributor shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Contributor and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Contributor since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act (the "Effective Date") and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Contributor and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Contributor shall have received all documents, duly executed in form satisfactory to Contributor and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. Within five business days after requested by Pentegra, Contributor and Shareholders shall deliver to Pentegra the following, all of which shall be in a form reasonably satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Contributor authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) a bill of sale conveying the Assets to Pentegra; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (f) certificates of the Shareholders and a duly authorized officer of Contributor dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Contributor and Shareholder contained herein; (ii) as to the performance of and compliance by Contributor and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Contributor and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Contributor certifying as to the incumbency of the directors and officers of Contributor and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Contributor; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Contributor and any state of required foreign qualification of Contributor establishing that Contributor is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Contributor and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Contributor, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Contributor; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Contributor, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Contributor and Shareholder, the following, all of which shall be in a form reasonably satisfactory to counsel to Contributor and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Contributor; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Contributor; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Contributor to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Contributor and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of three (3) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD CONTRIBUTOR AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING CONTRIBUTOR AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. CONTRIBUTOR AND SHAREHOLDERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS PRIOR TO THE CLOSING DATE, (C) ANY VIOLATION BY CONTRIBUTOR OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES (OTHER THAN PENTEGRA) OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE CONTRIBUTOR OR SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (D) TAXES (OTHER THAN SALES AND USE TAXES) OF CONTRIBUTOR OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (E) ANY LIABILITY OF CONTRIBUTOR OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (F) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (G) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (H) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL IN WRITING BY THE CONTRIBUTOR OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. Except with respect to the failure of Pentegra to satisfy the payment of the Acquisition Consideration, the parties hereto hereby acknowledge and agree that the indemnification rights of the parties under this Section 10 and equitable remedies, including without limitation, injunctive relief, represent the sole and exclusive remedies that the parties hereto have with respect to the breach of any representation, warranty or covenant set forth in this Agreement. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Contributor or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. In the event of any breach of warranty, representation, covenant or agreement by Pentegra giving rise to indemnification under Section 10.2 or 10.4 hereof, Contributor shall be entitled to offset the amount of damages actually incurred by it as a result of such breach of a warranty, representation or covenant or agreement against any amounts payable by Contributor or the Practice, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Contributor or Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Contributor or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Contributor or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Contributor or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Contributor if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Contributor, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Contributor shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Contributor pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Contributor pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933, as amended or an exemption thereunder. The Pentegra Common Stock to be acquired by Contributor pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Contributor covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Contributor resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Contributor, Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Contributor, Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Contributor and Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Contributor and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Contributor or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Contributor and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto, at their sole cost and expense, with the opportunity to contest such disclosure, (iii) Contributor and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Contributor and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Contributor or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Contributor and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Shareholders, Contributor and Pentegra shall be filed in a manner consistent with such intention and Contributor and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Contributor or Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.13, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Contributor or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Contributor. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF CONTRIBUTOR AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Contributor, be relieved from its obligations to Contributor under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Contributor, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at Closing a pro rata portion of all taxes (other than sales and use taxes) levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Contributor and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Contributor or may demand from Contributor, and Contributor agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Contributors or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. RICHARD W. MAINS, D.M.D.., P.C. By: /s/ Richard W. Mains ----------------------------------- Its: President ----------------------------------- PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman ----------------------------------- Its: Senior VP ----------------------------------- /s/ Richard W. Mains --------------------------------------- Richard W. Mains, D.M.D., P.C. INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.34 30 EXHIBIT 2.34 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., and JAMES M MCDONOUGH, D.D.S. TABLE OF CONTENTS Page ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. 2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . 3 2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . 3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . 3 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . 3 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . 6 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . 7 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . 7 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . 8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . 8 3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . 8 Section 4. COVENANTS OF DENTIST. 4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 9 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . 9 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . 9 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . .10 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . .10 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . .10 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . .10 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . .10 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . .10 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . . .10 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . .11 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . .11 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . .11 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . .11 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . .11 Section 6. COVENANTS OF PENTEGRA AND DENTIST 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . .12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . .12 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . .12 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . .12 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . .12 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . .12 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . .13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . .13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . .13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . .13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . .13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . .13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . .13 Section 8. DENTIST'S CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . .13 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . .13 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . .13 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . .14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . . .14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . .15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . .15 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . .16 10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . . . . .16 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . .17 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . .18 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . .19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . .19 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . .20 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . .20 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . .20 14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . .21 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . .21 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . .21 14.12 NO RULE OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . .21 14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . .21 14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.15 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . .21 14.16 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra") and JAMES M. MCDONOUGH, D.D.S. ("Dentist"). WITNESSETH: WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires to receive from Dentist, certain assets of Dentist; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Dentist, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. . NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Dentist shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Dentist's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Dentist shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Dentist contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Dentist the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Dentist, including, but not limited to, liabilities arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by Dentist, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Dentist reflected on the books of Dentist at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Dentist, any licensed professional employee or independent contractor of Dentist, (vi) any liability for the payment of any taxes of Dentist, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Dentist. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra or the Dentist shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise (i) in Pentegra its right, title or interest in, to or under any of the Assets, (ii) in Dentist its right, title or interest to the Consideration, or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Dentist shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. Dentist hereby represents and warrants to Pentegra as follows: 2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the State of Massachusetts. Dentist does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Dentist and constitute or will constitute the legal, valid and binding obligations of Dentist in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Dentist is a party or by which Dentist is bound, or violate any material restrictions of any kind to which Dentist is subject, or result in any lien or encumbrance on any of Dentist's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Dentist, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Dentist. 2.5 [INTENTIONALLY DELETED]. 2.6 [INTENTIONALLY DELETED]. 2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Dentist as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Dentist. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Dentist leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Dentist, as lessor or lessee, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Dentist has not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Dentist has no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Dentist, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Dentist has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Dentist, including the names of any entities from whom Dentist previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Dentist in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Dentist has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the most recent payroll report of Dentist, showing all current employees of Dentist and their current levels of compensation, (b) promised increases in compensation of employees of Dentist that have not yet been effected, (c) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Dentist is a party, copies of which have been delivered to Pentegra, and (d) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Dentist is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Dentist has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Dentist, and Dentist has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the Assets is subject to any pending, nor does Dentist have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Dentist, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Dentist, no basis for any such action exists, nor is there any legal impediment of which Dentist has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Dentist ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Dentist, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default. Dentist has no knowledge of any default by any other party to such Contracts. Dentist has not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Dentist, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Dentist on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (d) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (e) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Dentist since the Balance Sheet Date; (f) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (g) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (h) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (i) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (j) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (k) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; or (l) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Dentist has not received any notice that any tax deficiency or delinquency has been or may be asserted against Dentist. There are no audits relating to taxes of Dentist pending or in process or, to the knowledge of Dentist, threatened. Dentist is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Dentist. Dentist has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Dentist nor any predecessor of Dentist is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Dentist has delivered to Pentegra correct and complete copies of Dentist's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Dentist during the three calendar year period preceding the date of this Agreement. Dentist has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Dentist does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Nothing contained herein shall prohibit Dentist from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Dentist resulting from any action taken by Dentist or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Dentist does not know, or have reasonable grounds to know, of any basis for the assertion against Dentist as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Dentist (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Dentist has not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Dentist nor any licensed professional employee of Dentist has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Dentist has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Dentist has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Dentist Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Dentist Plans. Dentist has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Dentist Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Dentist or any licensed professional employee of Dentist of any Federal, state or local law or regulation. Dentist has not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Dentist. 2.24 THIRD PARTY PAYORS. Dentist and each licensed professional employee or independent contractor of Dentist has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Dentist and each licensed professional employee of Dentist. Neither Dentist nor any licensed professional employee of Dentist has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Dentist and Dentist's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by Dentist or to be furnished by Dentist to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Dentist has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or employee or family member of Dentist, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Dentist or any organization that has a material contract or arrangement with Dentist. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Dentist's services which accounted for more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has good relations with all such payors and other material payors of Dentist and none of such payors has notified Dentist that it intends to discontinue its relationship with Dentist or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Dentist as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF DENTIST. Dentist agrees that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Dentist agrees to complete the Exhibits hereto to be provided by him in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the Assets in the ordinary course. Dentist shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Dentist shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Dentist shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Dentist. Dentist shall collect its receivables and pay its trade payables in the ordinary course of business. Dentist shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Dentist, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Dentist, the Business or the Assets as Pentegra or its representatives may request. Dentist shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Dentist is a party or relating to the Business or the Assets, and (b) any adverse change in Dentist's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall use his best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Dentist shall not, and shall use its best efforts to cause Dentist's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to the Dentist, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Dentist or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Dentist will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Dentist shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Dentist or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Dentist to any employee or other person or entity (including, without limitation, any Dentist Plan and any liability under employment contracts with Dentist) allocable to services performed prior to the Closing Date. Dentist acknowledges that the purpose and intent of this covenant is to assure that Pentegra shall have no liability whatsoever at any time after the Closing Date with respect to any of Dentist's employees or similar persons or entities, including, without limitation, any Dentist Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of the Dentist (other than in the ordinary course of business) or other employee or an independent contractor of Dentist, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Dentist, its business, assets or prospects. 4.8 [INTENTIONALLY OMITTED]. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material respect the tax or financial accounting methods or practices followed by Dentist (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Dentist will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Dentist required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Dentist covenants and agrees that all of the creditors with respect to the Business and the Assets will be paid in full by Dentist prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Dentist may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Dentist agrees to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Dentist leases any of its premises from the Dentist or other affiliate of Dentist, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Dentist designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Dentist shall remain liable under any Dentist Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Dentist's employees incurred by Dentist prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and shall be treated as Clinic employees for purposes of eligibility and participation in Dentist Plans. 4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the Dentist and the Practice are to practice dentistry. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Dentist shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it; and agrees to assist the Dentist with the preparation of his exhibits in form and substance satisfactory to Pentegra and the Dentist. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND DENTIST. Pentegra and Dentist agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra shall promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Dentist shall furnish all information concerning Dentist as may be reasonable requested in connection with any such action. Dentist represents and warrants that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Dentist shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Dentist shall furnish Pentegra will all information concerning itself and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Dentist contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Dentist prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Dentist, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; DENTIST AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Dentist shall have executed and delivered a Dentist Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Dentist shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her employment agreement and executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra. 7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Dentist and its affiliates and Dentist shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured on irs liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Dentist since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. DENTIST'S CONDITIONS PRECEDENT. The obligations of Dentist hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly executed in form satisfactory to Dentist and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. 8.6 CONSENTS AND APPROVALS. Pentegra shall have obtained all necessary government and other third-party approvals and consents. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF DENTIST. Within five business days after requested by Pentegra, Dentist shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreemen and security agreement referred to therein; (b) executed Employment Agreements; (c) a bill of sale conveying the Assets to Pentegra; (d) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (e) certificates of Dentist dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Dentist contained herein; (ii) as to the performance of and compliance by Dentist with all covenants contained herein; and (iii) certifying that all conditions precedent of Dentist to the Closing have been satisfied; (f) an opinion of counsel to Dentist opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Dentist, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (g) non-foreign affidavits executed by Dentist; (h) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (i) an executed Registration Rights Agreement between Pentegra and Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (j) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Dentist the following, all of which shall be in a form satisfactory to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Dentist; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Dentist; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Dentist to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Dentist or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of three (3) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters and tax representations shall survive the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (E) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (F) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (G ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE DENTIST IN WRITING SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 LIMITATION ON INDEMNIFICATION. Notwithstanding anything contained herein, Dentist shall not be required to indemnify Pentegra unless and to the extent that the aggregate amount of damages, losses, liabilities, costs and other sums ("Damages") incurred by Pentegra shall exceed an amount equal to $30,000.00. In no event shall Pentegra be required to indemnify Dentist unless and to the extent that the aggregate amount of Damages incurred by Dentist exceeds $30,000.00. 10.6 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Dentist giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement; provided, however, that Pentegra shall provide Dentist with fifteen (15) days notice prior to such setoff during which time Dentist may object to such offset providing such reasons for the dispute in which case the parties shall proceed to arbitration in accordance with the terms of this Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Dentist contained in this Agreement or in any certificate or other document executed and delivered by Dentist pursuant to this Agreement is or becomes untrue or breached in any material respect or if Dentist fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Dentist if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; or (d) by Pentegra or Dentist if the transaction contemplated hereby shall not have been consummated by December 31, 1997. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Dentist pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the shares of Pentegra Common Stock to be delivered to Dentist pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Dentist covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Dentist resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect its own interests in connection with the acquisition of the Pentegra Common Stock. Dentist and its representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Dentist and its representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Dentist is an "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes and acknowledges that it had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Dentist agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Dentist, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Dentist shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Dentist reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Dentist is the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Dentist from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Dentist and Pentegra shall be filed in a manner consistent with such intention and Dentist and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Dentist: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Dentist for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Dentist. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Dentist, be relieved from its obligations to Dentist under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Dentist, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman -------------------------------------- Its: Senior VP -------------------------------------- /s/ James M. McDonough ------------------------------------------- James M. McDonough, D.D.S. INDEX TO EXHIBITS EXHIBIT DESCRIPTION ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 [intentionally omitted] 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.35 31 EXHIBIT 2.35 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., JAMES W. MEDLOCK, D.D.S., P.A., and JAMES MEDLOCK, D.D.S. TABLE OF CONTENTS
Page ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . 3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 12 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 12 Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 13 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 13 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 13 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 14 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 14 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS . . . . . . . . . . . . . 17 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 18 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 19 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 20 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . . . 21 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . 21 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . 22 14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . 22 14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . 22 14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), JAMES W. MEDLOCK, D.D.S., P.A., a Florida professional association ("Contributor") and JAMES MEDLOCK, D.D.S., shareholder of Contributor (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Contributor operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra desires to receive from Contributor, certain assets of Contributor; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Contributor, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Contributor shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Contributor's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Contributor shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Contributor contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Contributor the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Contributor listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Contributor, including, but not limited to, liabilities arising under any Contributor Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by any Shareholder or Contributor, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Contributor reflected on the books of Contributor at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Contributor, any licensed professional employee or independent contractor of Contributor or any Shareholder, (vi) any liability for the payment of any taxes of Contributor or any Shareholder, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Contributor or any Shareholder. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, Contributor and Shareholders shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS. Contributor and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Contributor is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Florida. Contributor has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Contributor does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Contributor a party to any joint venture or partnership. The Shareholders are the sole shareholders of Contributor and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Contributor's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Contributor are owned by Contributor in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Contributor on any matter, (b) securities of Contributor convertible into equity interests in Contributor, or (c) commitments, options, rights or warrants to issue any such equity interests in Contributor, to issue securities of Contributor convertible into such equity interests, or to redeem any securities of Contributor. No shares of capital stock of Contributor have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Contributor's stockholders. Contributor is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Contributor does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Contributor has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Contributor and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Contributor and Shareholders, enforceable against Contributor and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Contributor or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Contributor or any Shareholder is a party or by which Contributor or any Shareholder is bound, or violate any material restrictions of any kind to which Contributor is subject, or result in any lien or encumbrance on any of Contributor's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Contributor and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Contributor or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Contributor on any of its capital stock since the Balance Sheet Date. No repurchase of any of Contributor's capital stock has been approved, effected or is pending, or is contemplated by Contributor. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Contributor and all amendments thereto have been delivered to Pentegra. The minute books of Contributor contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Contributor since its formation. The books of account of Contributor have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Contributor have been properly recorded in such books. 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Contributor as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Contributor. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Contributor or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Contributor, as lessor or lessee, or any condition or event of which any Shareholder or Contributor has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Contributor or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Contributor and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Contributor, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Contributor has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Contributor, including the names of any entities from whom Contributor previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Contributor is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Contributor in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Contributor has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Contributor and the offices held by each, (b) the most recent payroll report of Contributor, showing all current employees of Contributor and their current levels of compensation, (c) promised increases in compensation of employees of Contributor that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Contributor is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Contributor is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Contributor has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Contributor, and Contributor has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Contributor nor the Business nor any of the Assets is subject to any pending, nor does Contributor or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Contributor, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Contributor and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Contributor or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Contributor ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Contributor or any Shareholder, or any condition or event of which Contributor or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Contributor and Shareholders have no knowledge of any default by any other party to such Contracts. Contributor and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Contributor are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Contributor or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Contributor on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Contributor has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Contributor since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Contributor; (o) Repurchased, approved any repurchase or agreed to repurchase any of Contributor's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Contributor has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Contributor has not received any notice that any tax deficiency or delinquency has been or may be asserted against Contributor. There are no audits relating to taxes of Contributor pending or in process or, to the knowledge of Contributor, threatened. Contributor is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Contributor. Contributor has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Contributor nor any predecessor of Contributor is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Contributor has delivered to Pentegra correct and complete copies of Contributor's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Contributor during the three calendar year period preceding the date of this Agreement. Contributor has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Contributor does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Contributor and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Contributor from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Contributor or Contributor's shareholders resulting from any action taken by Contributor or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Contributor did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Contributor and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Contributor or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Contributor (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Contributor, each Shareholder and each licensed professional of Contributor carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Contributor have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Contributor, nor any Shareholder nor any licensed professional employee of Contributor has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Contributor has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Contributor Plan," and collectively "Contributor Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Contributor has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Contributor Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Contributor Plans. Contributor has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Contributor Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Shareholders and Contributor's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Contributor, any Shareholder or any licensed professional employee of Contributor of any Federal, state or local law or regulation. Contributor and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Contributor. 2.24 THIRD PARTY PAYORS. Contributor, Shareholders and each licensed professional employee or independent contractor of Contributor has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Contributor, any Shareholder and each licensed professional employee of Contributor. Neither Contributor, nor any Shareholder, nor any licensed professional employee of Contributor has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Contributor, Shareholders and Contributor's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Contributor or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Contributor or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Contributor has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Contributor, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Contributor or any organization that has a material contract or arrangement with Contributor. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Contributor's services which accounted for more than 10% of revenues of Contributor in the preceding fiscal year. Contributor has good relations with all such payors and other material payors of Contributor and none of such payors has notified Contributor that it intends to discontinue its relationship with Contributor or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Contributor and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING: Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Contributor or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS. Contributor and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Contributor and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Contributor and Shareholders shall operate the Business and use the Assets in the ordinary course. Contributor and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Contributor and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Contributor and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Contributor. Contributor and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Contributor and Shareholdes shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Contributor and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Contributor, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Contributor, the Business or the Assets as Pentegra or its representatives may request. Contributor and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Contributor is a party or relating to the Business or the Assets, and (b) any adverse change in Contributor's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Contributor and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of Contributor contemplated by the Service Agreement and to conduct the intended business of Contributor and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Contributor and Shareholders shall not, and shall use its best efforts to cause Contributor's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Contributor or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Contributor and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Contributor and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Contributor or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Contributor to any employee or other person or entity (including, without limitation, any Contributor Plan and any liability under employment contracts with Contributor) allocable to services performed prior to the Closing Date. Contributor and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Contributor's employees or similar persons or entities, including, without limitation, any Contributor Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Contributor, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Contributor, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Contributor, nor will any repurchase of any of Contributor's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Contributor and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Contributor (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Contributor and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Contributor required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Contributor hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Contributor and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Contributor prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Contributor and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Contributor and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Contributor and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Contributor leases any of its premises from any Shareholder or other affiliate of Contributor or any shareholder of Contributor, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Contributor and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Contributor designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Contributor and Shareholders shall remain liable under any Contributor Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Contributor's employees incurred by Contributor prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that all employees of Contributor hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Contributor and shall be treated as Clinic employees for purposes of eligibility and participation in Contributor Plans. 4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS. Pentegra, Shareholders and Contributor agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Contributor and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Contributor and Shareholders shall furnish all information concerning Contributor and Shareholders as may be reasonable requested in connection with any such action. Contributor and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Contributor and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Contributor and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Contributor and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Contributor and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Contributor and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Contributor, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Contributor. Each Shareholder shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of Contributor under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and caused each shareholder of Contributor that has an existing employment agreement with Contributor to have terminated his or her employment agreement with Contributor and shall have executed an employment agreement ("Employment Agreement") with Contributor in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Contributor and Pentegra. 7.9 CONSENTS AND APPROVALS. Contributor and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Contributor and its shareholders or affiliates and Contributor shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Contributor and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Contributor since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Contributor and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Contributor shall have received all documents, duly executed in form satisfactory to Contributor and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. Within five business days after requested by Pentegra, Contributor and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Contributor authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) a bill of sale conveying the Assets to Pentegra; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (f) certificates of the Shareholders and a duly authorized officer of Contributor dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Contributor and Shareholder contained herein; (ii) as to the performance of and compliance by Contributor and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Contributor and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Contributor certifying as to the incumbency of the directors and officers of Contributor and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Contributor; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Contributor and any state of required foreign qualification of Contributor establishing that Contributor is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Contributor and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Contributor, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Contributor; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Contributor, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Contributor and Shareholder, the following, all of which shall be in a form satisfactory to counsel to Contributor and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Contributor; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Contributor; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Contributor to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Contributor and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD CONTRIBUTOR AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING CONTRIBUTOR AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. CONTRIBUTOR AND SHAREHOLDERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY CONTRIBUTOR OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE CONTRIBUTOR OR SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF CONTRIBUTOR OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF CONTRIBUTOR OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE CONTRIBUTOR OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Contributor or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Contributor or Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Contributor or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Contributor or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Contributor or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Contributor if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Contributor, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Contributor shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Contributor pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Contributor pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Contributor pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Contributor covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Contributor resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Contributor, Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Contributor, Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Contributor and Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Contributor and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Contributor or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Contributor and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Contributor and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Contributor and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Contributor or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Contributor and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Shareholders, Contributor and Pentegra shall be filed in a manner consistent with such intention and Contributor and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Contributor or Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Contributor or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Contributor. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Contributor, be relieved from its obligations to Contributor under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Contributor, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Contributor and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Contributor or may demand from Contributor, and Contributor agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Contributors or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. JAMES W. MEDLOCK, D.D.S., P.A. By: /s/ James W. Medlock, D.D.S. --------------------------------------- James W. Medlock, DDS, President PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman --------------------------------------- Its: Senior VP --------------------------------------- /s/ James Medlock, D.D.S. --------------------------------------- James Medlock, D.D.S. INDEX TO EXHIBITS Exhibit Description ------- ------------ Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.36 32 EXHIBIT 2.36 AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG PENTEGRA DENTAL GROUP, INC., JAMES RANDY MELLARD, D.D.S., M.S., P.C. AND JAMES RANDY MELLARD, D.D.S., M.S. TABLE OF CONTENTS Page ---- Section 1. TERMS OF THE REORGANIZATION 1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . 2 1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . 4 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . 9 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . 11 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . 12 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . 13 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . 13 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 13 Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . 13 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 14 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . 14 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . 14 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . 14 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . 14 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . 14 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . 14 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . 14 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . 14 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . 14 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . 15 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 15 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . 15 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . 15 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . 15 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . 16 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . 17 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . 17 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . 18 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . 19 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 20 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . 20 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . 21 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . 22 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . 22 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . 22 14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . 22 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . 22 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . 23 14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . 23 14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . 23 14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), James Randy Mellard, D.D.S., M.S., P.C. ("Company") and James Randy Mellard, D.D.S., M.S. shareholders of Company (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Company operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, the Boards of Directors of the Company and Pentegra have determined that a reorganization between each of them is in the best interests of their respective companies; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Company, the "Target Companies") and simultaneously with the closing of the reorganization contemplated herein, intends to consummate its initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock"); WHEREAS, it is intended for Federal income tax purposes that the reorganization contemplated by this Agreement shall qualify as an reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE REORGANIZATION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 MERGER. Subject to and upon the terms and conditions contained herein, on the Closing Date, the Company shall be merged with and into Pentegra (or its designated affiliate, in which case, the references herein to Pentegra shall be to such designated affiliate and its shares of common stock) in accordance with this Agreement and the separate corporate existence of the Company shall thereupon cease ("Merger"). Pentegra shall be the surviving corporation in the Merger ("Surviving Corporation") and shall continue to be governed by the laws of the State of Delaware and the separate corporate existence of Pentegra with all rights, privileges, powers, immunities and purposes shall continue unaffected by the Merger. The Merger shall have the effects specified in the Delaware General Corporation Law and the Business Corporation Law. If all the conditions to the Merger set forth herein shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated in accordance herewith, the parties hereto shall cause to be properly executed and filed on the Closing Date Certificates of Merger for the Company meeting the applicable legal requirements. The Mergers shall become effective on the Closing Date or the filing of such documents, in accordance with applicable law, or at such later time as the parties hereto have agreed upon and designated in such merger filings. 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation until duly amended in accordance with their terms. 1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra immediately prior to the effective date of the Merger shall be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. The persons who are officers of Pentegra immediately prior to the effective date of the Merger shall be the officers of the Surviving Corporation and shall hold their respective offices until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal. 1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and without any action on the part of the holder thereof, all shares of the Company's common stock issued and outstanding on the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired and shall cease to exist, and each holder of a certificate of representing shares of Company common stock shall thereafter cease to have any rights with respect to such shares except the right to receive the consideration set forth on ANNEX I attached hereto (the "Merger Consideration"). Each share of common stock of the Company held in treasury at the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired without payment of any consideration therefor. On the effective date of the Merger, each share of Pentegra Common Stock issued and outstanding shall, by virtue of he Mergers, and without any action on the part of the holder thereof, continue unchanged and remain outstanding as a share of validly issued, fully paid and nonassessable share of Surviving Corporation common stock. 1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger, the Shareholders, as the holders of a certificate or certificates representing shares of Company common stock shall, upon surrender of such certificate or certificates, receive the Merger Consideration, and until the certificate or certificates of Company common stock shall have been surrendered by the Shareholder and replaced by a certificate or certificates representing Pentegra Common Stock (as set forth on ANNEX I), the certificate or certificates of Company common stock shall, for all purposes be deemed to evidence ownership of the number of shares of Pentegra Common Stock determined in accordance with the provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the Shareholders in the Merger shall be deemed for all purposes to have been issued by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at Closing the certificate or certificates representing the Company common stock owned by them, duly endorsed in blank by the Shareholders, or accompanied by duly executed blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the Shareholder's expense, affixed and cancelled. 1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Company and Shareholders shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Texas. Company has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Company does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Company a party to any joint venture or partnership. The Shareholders are the sole shareholders of Company and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Company are owned by Company in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Company on any matter, (b) securities of Company convertible into equity interests in Company, or (c) commitments, options, rights or warrants to issue any such equity interests in Company, to issue securities of Company convertible into such equity interests, or to redeem any securities of Company. No shares of capital stock of Company have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Company's stockholders. Company is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Company does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Company has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Company and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Company and Shareholders, enforceable against Company and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Company or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Company or any Shareholder is a party or by which Company or any Shareholder is bound, or violate any material restrictions of any kind to which Company is subject, or result in any lien or encumbrance on any of Company's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All material building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Company and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Company or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Company on any of its capital stock since the Balance Sheet Date. No repurchase of any of Company's capital stock has been approved, effected or is pending, or is contemplated by Company. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Company and all amendments thereto have been delivered to Pentegra. The minute books of Company contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Company since its formation. The books of account of Company have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Company have been properly recorded in such books. 2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Company as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Company. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Company or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Company, as lessor or lessee, or any condition or event of which any Shareholder or Company has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Company or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Company and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. Pentegra acknowledges that it has acquired the assets "where and as is" relying solely upon Pentegra's own examination. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Company, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Company has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Company, including the names of any entities from whom Company previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Company in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Company has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Company and the offices held by each, (b) the most recent payroll report of Company, showing all current employees of Company and their current levels of compensation, (c) promised increases in compensation of employees of Company that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Company is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Company is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Company has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Company, and Company has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Except as set forth on Exhibit 2.16, neither any Shareholder, Company nor the Business nor any of the Assets is subject to any pending, nor does Company or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Company, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Company and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Company or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Company has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Company ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Company or any Shareholder, or any condition or event of which Company or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Company and Shareholders have no knowledge of any default by any other party to such Contracts. Company and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Company or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Company on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement, other than in the course of business; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Company since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Company; (o) Repurchased, approved any repurchase or agreed to repurchase any of Company's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Company has filed all tax returns (including tax reports and other statements) required to have been filed by it or have been properly extended, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Company has not received any notice that any tax deficiency or delinquency has been or may be asserted against Company. There are no audits relating to taxes of Company pending or in process or, to the knowledge of Company, threatened. Company is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Company. Company has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Company nor any predecessor of Company is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Company has delivered to Pentegra correct and complete copies of Company's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Company during the three calendar year period preceding the date of this Agreement. Company has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) No Shareholder presently intends to dispose of any of the shares of Pentegra Common Stock to be received hereunder nor is a party to any plan, arrangement or agreement for the disposition of such shares. Company and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Shareholders from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Company or Company's shareholders resulting from any action taken by Company or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any material liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Company or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Company (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed professional of Company carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Company have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Company, nor any Shareholder nor any licensed professional employee of Company has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Company has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company Plan," and collectively "Company Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. To the best of the Company's knowledge, no act or failure to act by Company has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Company Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Company Plans. Company has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Company Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Company, any Shareholder or any licensed professional employee of Company of any Federal, state or local law or regulation. Company and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Company. 2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed professional employee or independent contractor of Company has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Company, any Shareholder and each licensed professional employee of Company. Neither Company, nor any Shareholder, nor any licensed professional employee of Company has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Company, Shareholders and Company's licensed professional employees have not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Company or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Company has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Company (or their respective spouses, children or affiliates) owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Company or any organization that has a material contract or arrangement with Company. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Company's services which accounted for more than 10% of revenues of Company in the preceding fiscal year. Company has good relations with all such payors and other material payors of Company and none of such payors has notified Company that it intends to discontinue its relationship with Company or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Company and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Pentegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the reorganization contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the reorganization contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Company or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Company and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to both Company and Pentegra. 4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the Business and use the Assets in the ordinary course. Company and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Company and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Company and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Company. Company and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Company and Shareholder shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Company, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Company, the Business or the Assets as Pentegra or its representatives may request. Company and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Company is a party or relating to the Business or the Assets, and (b) any adverse change in Company's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Company and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Company and Shareholders shall not, and shall use its best efforts to cause Company's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Company or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Company and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Company and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Company or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Company to any employee or other person or entity (including, without limitation, any Company Plan and any liability under employment contracts with Company) allocable to services performed prior to the Closing Date. Company and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Company's employees or similar persons or entities, including, without limitation, any Company Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Company shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Company, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Company, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Company, nor will any repurchase of any of Company's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the reorganization contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Company (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Company and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Company required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Company hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Company and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Company prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Company and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Company and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Company leases any of its premises from any Shareholder or other affiliate of Company or any shareholder of Company, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dentist employees of Company employed by the Company as of the Closing Date, with such employment to be effective as of the Closing Date. Notwithstanding the above, Company and Shareholders shall remain liable under any Company Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Company's employees incurred by Company prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Company and shall be treated as Clinic employees for purposes of eligibility and participation in Company Plans. 4.15 INSURANCE. Company shall agree to have and shall assist Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a limited liability company, partnership or other legal entity (the "Practice") for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the practice of dentistry is conducted by the Shareholders and the Practice. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Shareholders shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. The Company shall have transferred the Excluded Assets set forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for equity interest in the Practice, and the Company shall have distributed such equity interests in the Practice to the Shareholders. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice on the Closing Date and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and have filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra and Company agree to complete the Exhibits hereto to be provided by both parties. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS. Pentegra, Shareholders and Company agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Company and Shareholders shall furnish all information concerning Company and Shareholders as may be reasonable requested in connection with any such action. Company and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Company and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Company and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Company and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Company and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Company, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a mutually agreeable Service Agreement (the "Service Agreement"), which may be in the form attached hereto as EXHIBIT 7.7, and otherwise satisfactory to Company and Pentegra, pursuant to which Pentegra will provide management services to the Practice. Each Shareholder shall have executed and delivered a mutually agreeable Guaranty Agreement which may be in the form attached as EXHIBIT 4.10, and otherwise satisfactory to Company and Pentegra, of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused each shareholder of Company that has an existing employment agreement with Company to have terminated his or her employment agreement with Company and shall have executed a mutually agreeable employment agreement ("Employment Agreement") with the Practice which may be in the form attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Company and Pentegra. 7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Company and its shareholders or affiliates and Company shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Company since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Company and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Company shall have received all documents, duly executed in form satisfactory to Company and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. On or before the Closing Date, Company and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Company authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) executed merger certificate and/or plan as required by applicable state law; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra and the original stock certificates together with blank stock powers representing the outstanding shares of Company common stock; (f) certificates of the Shareholders and a duly authorized officer of Company dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Company and Shareholder contained herein; (ii) as to the performance of and compliance by Company and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Company and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Company certifying as to the incumbency of the directors and officers of Company and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Company; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Company and any state of required foreign qualification of Company establishing that Company is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Company and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Company, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Company; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Company, in substantially the form attached hereto as EXHIBIT 9.1(L) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Company and Shareholders, the following, all of which shall be in a form satisfactory to counsel to Company and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Merger Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Company; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Company; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Company to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Company and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD COMPANY AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. (D) ANY LIABILITY OF PENTEGRA FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEY'S FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Company or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Company or any Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Company or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Company or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Company or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Company if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Company, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received as consideration by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, received by any party hereunder as consideration, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, received by any party hereunder as consideration, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Company pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Company pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Each Shareholder covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Company resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Shareholders are "accredited investor" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is a valuable, special and unique asset of Pentegra's businesses. Company and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Company or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Company and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Company and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Company and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Company and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. Pentegra recognizes and acknowledges that it had in the past, currently have, and in the future may possibly have, access to certain confidential information of Company that is a valuable, special and unique asset of Company. Pentegra agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Pentegra, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Pentegra shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Pentegra reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Pentegra is the sole and exclusive owner of such confidential information as a result of the transaction contemplated hereunder or otherwise. In the event of a breach or threatened breach by Pentegra of the provision of this SECTION 13, Company shall be entitled to an injunction restraining Pentegra from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement will qualify as a reorganization within the meaning of Section 368(a) of the Code. The tax returns (and schedules thereto) of Shareholders, Company and Pentegra shall be filed in a manner consistent with such intention and Shareholders and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Company and Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Company or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Company. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF TEXAS AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS AND THE ESCROW LETTER ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Company, be relieved from its obligations to Company under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Company, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Company and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Company or may demand from Company, and Company agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Company or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoenix, Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. James Randy Mellard, D.D.S., M.S., P.C. By: /s/ James R. Mellard, D.D.S. -------------------------------------- Its: President ------------------------------------- PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman --------------------------------------- Its: Senior Vice President -------------------------------------- /s/ James R. Mellard, D.D.S. ------------------------------------------ James Randy Mellard, D.D.S., M.S. INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Merger Consideration A Target Companies 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 4.16 Excluded Assets and Excluded Liabilities 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(1) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.37 33 EXHIBIT 2.37 AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG PENTEGRA DENTAL GROUP, INC., MARY B. MELLARD, D.D.S., P.C. AND MARY B. MELLARD, D.D.S. TABLE OF CONTENTS
Page ---- Section 1. TERMS OF THE REORGANIZATION 1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . . . . . 2 1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . 4 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . . 9 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . . 12 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . . 13 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 13 Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 14 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . . 14 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . 14 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . . 14 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . 15 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 15 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . . . . . 15 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . 17 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . . . . 18 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . 19 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . . 20 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . . 21 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . 22 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . 23 14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), Mary B. Mellard, D.D.S., P.C. ("Company") and Mary B. Mellard, D.D.S., shareholders of Company (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Company operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, the Boards of Directors of the Company and Pentegra have determined that a reorganization between each of them is in the best interests of their respective companies; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Company, the "Target Companies") and simultaneously with the closing of the reorganization contemplated herein, intends to consummate its initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock"); WHEREAS, it is intended for Federal income tax purposes that the reorganization contemplated by this Agreement shall qualify as an reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE REORGANIZATION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 MERGER. Subject to and upon the terms and conditions contained herein, on the Closing Date, the Company shall be merged with and into Pentegra (or its designated affiliate, in which case, the references herein to Pentegra shall be to such designated affiliate and its shares of common stock) in accordance with this Agreement and the separate corporate existence of the Company shall thereupon cease ("Merger"). Pentegra shall be the surviving corporation in the Merger ("Surviving Corporation") and shall continue to be governed by the laws of the State of Delaware and the separate corporate existence of Pentegra with all rights, privileges, powers, immunities and purposes shall continue unaffected by the Merger. The Merger shall have the effects specified in the Delaware General Corporation Law and the Business Corporation Law. If all the conditions to the Merger set forth herein shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated in accordance herewith, the parties hereto shall cause to be properly executed and filed on the Closing Date Certificates of Merger for the Company meeting the applicable legal requirements. The Mergers shall become effective on the Closing Date or the filing of such documents, in accordance with applicable law, or at such later time as the parties hereto have agreed upon and designated in such merger filings. 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation until duly amended in accordance with their terms. 1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra immediately prior to the effective date of the Merger shall be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. The persons who are officers of Pentegra immediately prior to the effective date of the Merger shall be the officers of the Surviving Corporation and shall hold their respective offices until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal. 1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and without any action on the part of the holder thereof, all shares of the Company's common stock issued and outstanding on the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired and shall cease to exist, and each holder of a certificate of representing shares of Company common stock shall thereafter cease to have any rights with respect to such shares except the right to receive the consideration set forth on ANNEX I attached hereto (the "Merger Consideration"). Each share of common stock of the Company held in treasury at the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired without payment of any consideration therefor. On the effective date of the Merger, each share of Pentegra Common Stock issued and outstanding shall, by virtue of he Mergers, and without any action on the part of the holder thereof, continue unchanged and remain outstanding as a share of validly issued, fully paid and nonassessable share of Surviving Corporation common stock. 1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger, the Shareholders, as the holders of a certificate or certificates representing shares of Company common stock shall, upon surrender of such certificate or certificates, receive the Merger Consideration, and until the certificate or certificates of Company common stock shall have been surrendered by the Shareholder and replaced by a certificate or certificates representing Pentegra Common Stock (as set forth on ANNEX I), the certificate or certificates of Company common stock shall, for all purposes be deemed to evidence ownership of the number of shares of Pentegra Common Stock determined in accordance with the provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the Shareholders in the Merger shall be deemed for all purposes to have been issued by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at Closing the certificate or certificates representing the Company common stock owned by them, duly endorsed in blank by the Shareholders, or accompanied by duly executed blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the Shareholder's expense, affixed and cancelled. 1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Company and Shareholders shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Texas. Company has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Company does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Company a party to any joint venture or partnership. The Shareholders are the sole shareholders of Company and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Company are owned by Company in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Company on any matter, (b) securities of Company convertible into equity interests in Company, or (c) commitments, options, rights or warrants to issue any such equity interests in Company, to issue securities of Company convertible into such equity interests, or to redeem any securities of Company. No shares of capital stock of Company have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Company's stockholders. Company is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Company does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Company has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Company and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Company and Shareholders, enforceable against Company and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Company or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Company or any Shareholder is a party or by which Company or any Shareholder is bound, or violate any material restrictions of any kind to which Company is subject, or result in any lien or encumbrance on any of Company's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All material building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Company and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Company or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Company on any of its capital stock since the Balance Sheet Date. No repurchase of any of Company's capital stock has been approved, effected or is pending, or is contemplated by Company. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Company and all amendments thereto have been delivered to Pentegra. The minute books of Company contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Company since its formation. The books of account of Company have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Company have been properly recorded in such books. 2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Company as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Company. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Company or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Company, as lessor or lessee, or any condition or event of which any Shareholder or Company has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Company or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Company and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(B)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. Pentegra acknowledges that it has acquired the assets "where and as is" relying solely upon Pentegra's own examination. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Company, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Company has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Company, including the names of any entities from whom Company previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Company in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Company has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Company and the offices held by each, (b) the most recent payroll report of Company, showing all current employees of Company and their current levels of compensation, (c) promised increases in compensation of employees of Company that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Company is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Company is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Company has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Company, and Company has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Except as set forth on Exhibit 2.16, neither any Shareholder, Company nor the Business nor any of the Assets is subject to any pending, nor does Company or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Company, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Company and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Company or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Company has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Company ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Company or any Shareholder, or any condition or event of which Company or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Company and Shareholders have no knowledge of any default by any other party to such Contracts. Company and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Company or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Company on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement, other than in the course of business; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Company since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Company; (o) Repurchased, approved any repurchase or agreed to repurchase any of Company's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Company has filed all tax returns (including tax reports and other statements) required to have been filed by it or have been properly extended, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Company has not received any notice that any tax deficiency or delinquency has been or may be asserted against Company. There are no audits relating to taxes of Company pending or in process or, to the knowledge of Company, threatened. Company is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Company. Company has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Company nor any predecessor of Company is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Company has delivered to Pentegra correct and complete copies of Company's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Company during the three calendar year period preceding the date of this Agreement. Company has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) No Shareholder presently intends to dispose of any of the shares of Pentegra Common Stock to be received hereunder nor is a party to any plan, arrangement or agreement for the disposition of such shares. Company and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Shareholders from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Company or Company's shareholders resulting from any action taken by Company or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any material liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Company or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Company (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed professional of Company carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Company have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Company, nor any Shareholder nor any licensed professional employee of Company has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Company has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company Plan," and collectively "Company Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. To the best of the Company's knowledge, no act or failure to act by Company has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Company Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Company Plans. Company has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Company Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Company, any Shareholder or any licensed professional employee of Company of any Federal, state or local law or regulation. Company and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Company. 2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed professional employee or independent contractor of Company has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Company, any Shareholder and each licensed professional employee of Company. Neither Company, nor any Shareholder, nor any licensed professional employee of Company has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Company, Shareholders and Company's licensed professional employees have not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Company or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Company has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Company (or their respective spouses, children or affiliates) owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Company or any organization that has a material contract or arrangement with Company. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Company's services which accounted for more than 10% of revenues of Company in the preceding fiscal year. Company has good relations with all such payors and other material payors of Company and none of such payors has notified Company that it intends to discontinue its relationship with Company or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Company and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Pentegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the reorganization contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the reorganization contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Company or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Company and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to both Company and Pentegra. 4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the Business and use the Assets in the ordinary course. Company and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Company and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Company and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Company. Company and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Company and Shareholder shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Company, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Company, the Business or the Assets as Pentegra or its representatives may request. Company and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Company is a party or relating to the Business or the Assets, and (b) any adverse change in Company's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Company and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Company and Shareholders shall not, and shall use its best efforts to cause Company's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Company or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Company and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Company and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Company or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Company to any employee or other person or entity (including, without limitation, any Company Plan and any liability under employment contracts with Company) allocable to services performed prior to the Closing Date. Company and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Company's employees or similar persons or entities, including, without limitation, any Company Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Company shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Company, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Company, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Company, nor will any repurchase of any of Company's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the reorganization contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Company (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Company and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Company required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Company hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Company and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Company prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Company and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Company and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Company leases any of its premises from any Shareholder or other affiliate of Company or any shareholder of Company, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dentist employees of Company employed by the Company as of the Closing Date, with such employment to be effective as of the Closing Date. Notwithstanding the above, Company and Shareholders shall remain liable under any Company Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Company's employees incurred by Company prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Company and shall be treated as Clinic employees for purposes of eligibility and participation in Company Plans. 4.15 INSURANCE. Company shall agree to have and shall assist Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a limited liability company, partnership or other legal entity (the "Practice") for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the practice of dentistry is conducted by the Shareholders and the Practice. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Shareholders shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. The Company shall have transferred the Excluded Assets set forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for equity interest in the Practice, and the Company shall have distributed such equity interests in the Practice to the Shareholders. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice on the Closing Date and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and have filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra and Company agree to complete the Exhibits hereto to be provided by both parties. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS. Pentegra, Shareholders and Company agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Company and Shareholders shall furnish all information concerning Company and Shareholders as may be reasonable requested in connection with any such action. Company and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Company and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Company and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Company and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Company and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Company, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a mutually agreeable Service Agreement (the "Service Agreement"), which may be in the form attached hereto as EXHIBIT 7.7, and otherwise satisfactory to Company and Pentegra, pursuant to which Pentegra will provide management services to the Practice. Each Shareholder shall have executed and delivered a mutually agreeable Guaranty Agreement, which may be in the form attached as EXHIBIT 4.10, and otherwise satisfactory to Company and Pentegra, of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused each shareholder of Company that has an existing employment agreement with Company to have terminated his or her employment agreement with Company and shall have executed a mutually agreeable employment agreement ("Employment Agreement") with the Practice, which may be in the form attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Company and Pentegra. 7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Company and its shareholders or affiliates and Company shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Company since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Company and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Company shall have received all documents, duly executed in form satisfactory to Company and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. On or before the Closing Date, Company and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Company authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) executed merger certificate and/or plan as required by applicable state law; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra and the original stock certificates together with blank stock powers representing the outstanding shares of Company common stock; (f) certificates of the Shareholders and a duly authorized officer of Company dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Company and Shareholder contained herein; (ii) as to the performance of and compliance by Company and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Company and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Company certifying as to the incumbency of the directors and officers of Company and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Company; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Company and any state of required foreign qualification of Company establishing that Company is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Company and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Company, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Company; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Company, in substantially the form attached hereto as EXHIBIT 9.1(L) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Company and Shareholders, the following, all of which shall be in a form satisfactory to counsel to Company and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Merger Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Company; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Company; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Company to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Company and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD COMPANY AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. (D) ANY LIABILITY OF PENTEGRA FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Company or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Company or any Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Company or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Company or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Company or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Company if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Company, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received as consideration by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, received by any party hereunder as consideration, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, received by any party hereunder as consideration, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Company pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Company pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Each Shareholder covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Company resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Shareholders are "accredited investor" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is a valuable, special and unique asset of Pentegra's businesses. Company and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Company or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Company and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Company and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Company and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Company and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. Pentegra recognizes and acknowledges that it had in the past, currently have, and in the future may possibly have, access to certain confidential information of Company that is a valuable, special and unique asset of Company. Pentegra agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Pentegra, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Pentegra shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Pentegra reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Pentegra is the sole and exclusive owner of such confidential information as a result of the transaction contemplated hereunder or otherwise. In the event of a breach or threatened breach by Pentegra of the provision of this SECTION 13, Company shall be entitled to an injunction restraining Pentegra from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement will qualify as a reorganization within the meaning of Section 368(a) of the Code. The tax returns (and schedules thereto) of Shareholders, Company and Pentegra shall be filed in a manner consistent with such intention and Shareholders and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Company and Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Company or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Company. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF TEXAS AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS AND THE ESCROW LETTER ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Company, be relieved from its obligations to Company under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Company, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Company and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Company or may demand from Company, and Company agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Company or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoenix, Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. Mary B. Mellard, D.D.S., P.C. By: /s/ Mary B. Mellard, D.D.S. ------------------------------------- Its: President ------------------------------------ PENTEGRA DENTAL GROUP, INC. By: /s/ James L. Dunn, Jr. ------------------------------------- Its: Senior Vice President ------------------------------------ /s/ Mary B. Mellard, D.D.S. ----------------------------------------- Mary B. Mellard, D.D.S. INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Merger Consideration A Target Companies 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 4.16 Excluded Assets and Excluded Liabilities 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.38 34 EXHIBIT 2.38 AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG PENTEGRA DENTAL GROUP, INC., T.L. MULLOOLY, D.D.S., INC., and T.L. MULLOOLY, D.D.S. TABLE OF CONTENTS
Page ---- Section 1. TERMS OF THE REORGANIZATION 1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . . . . 2 1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 4 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 9 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 12 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 13 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 13 Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 14 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 14 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 14 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 14 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 14 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 15 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 15 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 15 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . . . . 15 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 17 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . . . 18 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 19 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 20 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 20 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 21 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . . . 22 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . 22 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . 23 14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and executed to be effective August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), T.L. MULLOOLY, D.D.S., INC., a California professional coropration ("Company") and T.L. MULLOOLY, D.D.S., shareholder of Company (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Company operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, the Boards of Directors of the Company and Pentegra have determined that a reorganization between each of them is in the best interests of their respective companies; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Company, the "Target Companies") and simultaneously with the closing of the reorganization contemplated herein, intends to consummate its initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock"); WHEREAS, it is intended for Federal income tax purposes that the reorganization contemplated by this Agreement shall qualify as an reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE REORGANIZATION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 MERGER. Subject to and upon the terms and conditions contained herein, on the Closing Date, the Company shall be merged with and into Pentegra (or its designated affiliate, in which case, the references herein to Pentegra shall be to such designated affiliate and its shares of common stock) in accordance with this Agreement and the separate corporate existence of the Company shall thereupon cease ("Merger"). Pentegra shall be the surviving corporation in the Merger ("Surviving Corporation") and shall continue to be governed by the laws of the State of Delaware and the separate corporate existence of Pentegra with all rights, privileges, powers, immunities and purposes shall continue unaffected by the Merger. The Merger shall have the effects specified in the Delaware General Corporation Law and the California Business Corporation Law. If all the conditions to the Merger set forth herein shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated in accordance herewith, the parties hereto shall cause to be properly executed and filed on the Closing Date Certificates of Merger for the Company meeting the applicable legal requirements. The Mergers shall become effective on the Closing Date or the filing of such documents, in accordance with applicable law, or at such later time as the parties hereto have agreed upon and designated in such merger filings. 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation until duly amended in accordance with their terms. 1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra immediately prior to the effective date of the Merger shall be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. The persons who are officers of Pentegra immediately prior to the effective date of the Merger shall be the officers of the Surviving Corporation and shall hold their respective offices until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal. 1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and without any action on the part of the holder thereof, all shares of the Company's common stock issued and outstanding on the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired and shall cease to exist, and each holder of a certificate of representing shares of Company common stock shall thereafter cease to have any rights with respect to such shares except the right to receive the consideration set forth on ANNEX I attached hereto (the "Merger Consideration"). Each share of common stock of the Company held in treasury at the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired without payment of any consideration therefor. On the effective date of the Merger, each share of Pentegra Common Stock issued and outstanding shall, by virtue of he Mergers, and without any action on the part of the holder thereof, continue unchanged and remain outstanding as a share of validly issued, fully paid and nonassessable share of Surviving Corporation common stock. 1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger, the Shareholders, as the holders of a certificate or certificates representing shares of Company common stock shall, upon surrender of such certificate or certificates, receive the Merger Consideration, and until the certificate or certificates of Company common stock shall have been surrendered by the Shareholder and replaced by a certificate or certificates representing Pentegra Common Stock (as set forth on ANNEX I), the certificate or certificates of Company common stock shall, for all purposes be deemed to evidence ownership of the number of shares of Pentegra Common Stock determined in accordance with the provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the Shareholders in the Merger shall be deemed for all purposes to have been issued by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at Closing the certificate or certificates representing the Company common stock owned by them, duly endorsed in blank by the Shareholders, or accompanied by duly executed blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the Shareholder's expense, affixed and cancelled. 1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Company and Shareholders shall excecute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of California. Company has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Company does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Company a party to any joint venture or partnership. The Shareholders are the sole shareholders of Company and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Company are owned by Company in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Company on any matter, (b) securities of Company convertible into equity interests in Company, or (c) commitments, options, rights or warrants to issue any such equity interests in Company, to issue securities of Company convertible into such equity interests, or to redeem any securities of Company. No shares of capital stock of Company have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Company's stockholders. Company is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Company does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Company has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Company and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Company and Shareholders, enforceable against Company and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Company or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Company or any Shareholder is a party or by which Company or any Shareholder is bound, or violate any material restrictions of any kind to which Company is subject, or result in any lien or encumbrance on any of Company's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Company and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Company or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Company on any of its capital stock since the Balance Sheet Date. No repurchase of any of Company's capital stock has been approved, effected or is pending, or is contemplated by Company. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Company and all amendments thereto have been delivered to Pentegra. The minute books of Company contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Company since its formation. The books of account of Company have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Company have been properly recorded in such books. 2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Company as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Company. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Company or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Company, as lessor or lessee, or any condition or event of which any Shareholder or Company has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Company or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Company and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Company, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Company has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Company, including the names of any entities from whom Company previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Company in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Company has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Company and the offices held by each, (b) the most recent payroll report of Company, showing all current employees of Company and their current levels of compensation, (c) promised increases in compensation of employees of Company that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Company is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Company is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Company has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Company, and Company has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the Business nor any of the Assets is subject to any pending, nor does Company or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Company, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Company and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Company or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Company has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Company ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Company or any Shareholder, or any condition or event of which Company or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Company and Shareholders have no knowledge of any default by any other party to such Contracts. Company and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Company or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Company on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Company since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Company; (o) Repurchased, approved any repurchase or agreed to repurchase any of Company's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Company has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Company has not received any notice that any tax deficiency or delinquency has been or may be asserted against Company. There are no audits relating to taxes of Company pending or in process or, to the knowledge of Company, threatened. Company is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Company. Company has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Company nor any predecessor of Company is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Company has delivered to Pentegra correct and complete copies of Company's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Company during the three calendar year period preceding the date of this Agreement. Company has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) No Shareholder presently intends to dispose of any of the shares of Pentegra Common Stock to be received hereunder nor is a party to any plan, arrangement or agreement for the disposition of such shares. Company and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Shareholders from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Company or Company's shareholders resulting from any action taken by Company or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Company or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Company (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed professional of Company carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Company have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Company, nor any Shareholder nor any licensed professional employee of Company has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Company has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company Plan," and collectively "Company Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Company has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Company Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Company Plans. Company has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Company Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Company, any Shareholder or any licensed professional employee of Company of any Federal, state or local law or regulation. Company and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Company. 2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed professional employee or independent contractor of Company has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Company, any Shareholder and each licensed professional employee of Company. Neither Company, nor any Shareholder, nor any licensed professional employee of Company has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Company, Shareholders and Company's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Company or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Company has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Company, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Company or any organization that has a material contract or arrangement with Company. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Company's services which accounted for more than 10% of revenues of Company in the preceding fiscal year. Company has good relations with all such payors and other material payors of Company and none of such payors has notified Company that it intends to discontinue its relationship with Company or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Company and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the reorganization contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the reorganization contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Company or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Company and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the Business and use the Assets in the ordinary course. Company and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Company and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Company and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Company. Company and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Company and Shareholdes shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Company, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Company, the Business or the Assets as Pentegra or its representatives may request. Company and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Company is a party or relating to the Business or the Assets, and (b) any adverse change in Company's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Company and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Company and Shareholders shall not, and shall use its best efforts to cause Company's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Company or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Company and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Company and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Company or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Company to any employee or other person or entity (including, without limitation, any Company Plan and any liability under employment contracts with Company) allocable to services performed prior to the Closing Date. Company and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Company's employees or similar persons or entities, including, without limitation, any Company Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Company shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Company, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Company, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Company, nor will any repurchase of any of Company's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the reorganization contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Company (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Company and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Company required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Company hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Company and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Company prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Company and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Company and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Company leases any of its premises from any Shareholder or other affiliate of Company or any shareholder of Company, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dentist employees of Company designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Company and Shareholders shall remain liable under any Company Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Company's employees incurred by Company prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Company and shall be treated as Clinic employees for purposes of eligibility and participation in Company Plans. 4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the practice of dentistry is conducted by the Shareholders and the Practice. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Shareholders shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. The Company shall have transferred the Excluded Assets set forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for equity interest in the Practice, and the Company shall have distributed such equity interests in the Practice to the Shareholders. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and have filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS. Pentegra, Shareholders and Company agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Company and Shareholders shall furnish all information concerning Company and Shareholders as may be reasonable requested in connection with any such action. Company and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Company and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Company and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Company and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Company and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Company, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Each Shareholder shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused each shareholder of Company that has an existing employment agreement with Company to have terminated his or her employment agreement with Company and shall have executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Company and Pentegra. 7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Company and its shareholders or affiliates and Company shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Company since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Company and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Company shall have received all documents, duly executed in form satisfactory to Company and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days after requested by Pentegra, Company and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Company authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) executed merger certificate and/or plan as required by applicable state law; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra and the original stock certificates together with blank stock powers representing the outstanding shares of Company common stock; (f) certificates of the Shareholders and a duly authorized officer of Company dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Company and Shareholder contained herein; (ii) as to the performance of and compliance by Company and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Company and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Company certifying as to the incumbency of the directors and officers of Company and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Company; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Company and any state of required foreign qualification of Company establishing that Company is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Company and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Company, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Company; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Company and Shareholders, the following, all of which shall be in a form satisfactory to counsel to Company and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Merger Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Company; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Company; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Company to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Company and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Company or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Company or any Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Company or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Company or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Company or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Company if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Company, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Company pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Company pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Each Shareholder covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Company resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Company and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Company or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Company and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Company and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Company and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Company and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement will qualify as a reorganization within the meaning of Section 368(a) of the Code. The tax returns (and schedules thereto) of Shareholders, Company and Pentegra shall be filed in a manner consistent with such intention and Shareholders and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Company and Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Company or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Company. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Company, be relieved from its obligations to Company under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Company, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Company and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Company or may demand from Company, and Company agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Companys or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. T.L. MULLOOLY, D.D.S., INC. By: /s/ Thomas L. Mullooly --------------------------------------- Thomas L. Mullooly, President PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman --------------------------------------- Its: Senior VP --------------------------------------- /s/ Thomas L. Mullooly, D.D.S. ------------------------------------------ Thomas L. Mullooly, D.D.S. INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Merger Consideration A Target Companies 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 4.16 Excluded Assets and Excluded Liabilities 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.39 35 EXHIBIT 2.39 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., BYRON L. NOVOSAD, D.D.S., INC. AND BYRON L. NOVOSAD, D.D.S. TABLE OF CONTENTS
PAGE Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . 3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 12 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 12 Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 13 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 13 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 13 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 14 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 14 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS . . . . . . . . . . . . . 17 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 18 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 19 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 20 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . . . 21 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . 21 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . 22 14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . 22 14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . 22 14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), Byron L. Novosad, D.D.S., Inc. ("Contributor") and Byron L. Novosad, D.D.S., shareholders of Contributor (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Contributor operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra desires to receive from Contributor, certain assets of Contributor; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Contributor, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. . NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Contributor shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Contributor's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Contributor shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Contributor contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Contributor the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Contributor listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Contributor, including, but not limited to, liabilities arising under any Contributor Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by any Shareholder or Contributor, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Contributor reflected on the books of Contributor at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Contributor, any licensed professional employee or independent contractor of Contributor or any Shareholder, (vi) any liability for the payment of any taxes of Contributor or any Shareholder, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Contributor or any Shareholder. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, Contributor and Shareholders shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. 1.6 ENCUMBERANCE OF ASSETS. Pentegra will not encumber or sell any of the Contributed Assets without first obtaining the prior written consent of the Practice, with such consent not to be unreasonably withheld. SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS. Contributor and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Contributor is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Texas. Contributor has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Contributor does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Contributor a party to any joint venture or partnership. The Shareholders are the sole shareholders of Contributor and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Contributor's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Contributor are owned by Contributor in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Contributor on any matter, (b) securities of Contributor convertible into equity interests in Contributor, or (c) commitments, options, rights or warrants to issue any such equity interests in Contributor, to issue securities of Contributor convertible into such equity interests, or to redeem any securities of Contributor. No shares of capital stock of Contributor have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Contributor's stockholders. Contributor is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Contributor does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Contributor has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Contributor and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Contributor and Shareholders, enforceable against Contributor and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Contributor or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Contributor or any Shareholder is a party or by which Contributor or any Shareholder is bound, or violate any material restrictions of any kind to which Contributor is subject, or result in any lien or encumbrance on any of Contributor's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Contributor and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Contributor or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Contributor on any of its capital stock since the Balance Sheet Date. No repurchase of any of Contributor's capital stock has been approved, effected or is pending, or is contemplated by Contributor. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Contributor and all amendments thereto have been delivered to Pentegra. The minute books of Contributor contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Contributor since its formation. The books of account of Contributor have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Contributor have been properly recorded in such books. 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Contributor as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Contributor. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Contributor or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Contributor, as lessor or lessee, or any condition or event of which any Shareholder or Contributor has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Contributor or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Contributor and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Contributor, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Contributor has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Contributor, including the names of any entities from whom Contributor previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Contributor is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Contributor in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Contributor has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Contributor and the offices held by each, (b) the most recent payroll report of Contributor, showing all current employees of Contributor and their current levels of compensation, (c) promised increases in compensation of employees of Contributor that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Contributor is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Contributor is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Contributor has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Contributor, and Contributor has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Contributor nor the Business nor any of the Assets is subject to any pending, nor does Contributor or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Contributor, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Contributor and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Contributor or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Contributor ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Contributor or any Shareholder, or any condition or event of which Contributor or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Contributor and Shareholders have no knowledge of any default by any other party to such Contracts. Contributor and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Contributor are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Contributor or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Contributor on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Contributor has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Contributor since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Contributor; (o) Repurchased, approved any repurchase or agreed to repurchase any of Contributor's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Contributor has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Contributor has not received any notice that any tax deficiency or delinquency has been or may be asserted against Contributor. There are no audits relating to taxes of Contributor pending or in process or, to the knowledge of Contributor, threatened. Contributor is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Contributor. Contributor has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Contributor nor any predecessor of Contributor is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Contributor has delivered to Pentegra correct and complete copies of Contributor's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Contributor during the three calendar year period preceding the date of this Agreement. Contributor has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Contributor does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Contributor and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Contributor from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Contributor or Contributor's shareholders resulting from any action taken by Contributor or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Contributor did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Contributor and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Contributor or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Contributor (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Contributor, each Shareholder and each licensed professional of Contributor carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Contributor have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Contributor, nor any Shareholder nor any licensed professional employee of Contributor has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Contributor has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Contributor Plan," and collectively "Contributor Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Contributor has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Contributor Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Contributor Plans. Contributor has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Contributor Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Shareholders and Contributor's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Contributor, any Shareholder or any licensed professional employee of Contributor of any Federal, state or local law or regulation. Contributor and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Contributor. 2.24 THIRD PARTY PAYORS. Contributor, Shareholders and each licensed professional employee or independent contractor of Contributor has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Contributor, any Shareholder and each licensed professional employee of Contributor. Neither Contributor, nor any Shareholder, nor any licensed professional employee of Contributor has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Contributor, Shareholders and Contributor's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Contributor or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Contributor or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Contributor has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Contributor, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Contributor or any organization that has a material contract or arrangement with Contributor. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Contributor's services which accounted for more than 10% of revenues of Contributor in the preceding fiscal year. Contributor has good relations with all such payors and other material payors of Contributor and none of such payors has notified Contributor that it intends to discontinue its relationship with Contributor or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Contributor and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Pentegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Contributor or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS. Contributor and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Contributor and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Contributor and Shareholders shall operate the Business and use the Assets in the ordinary course. Contributor and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Contributor and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Contributor and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Contributor. Contributor and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Contributor and Shareholders shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Contributor and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Contributor, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Contributor, the Business or the Assets as Pentegra or its representatives may request. Contributor and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Contributor is a party or relating to the Business or the Assets, and (b) any adverse change in Contributor's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Contributor and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of Contributor contemplated by the Service Agreement and to conduct the intended business of Contributor and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Contributor and Shareholders shall not, and shall use its best efforts to cause Contributor's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Contributor or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Contributor and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Contributor and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Contributor or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Contributor to any employee or other person or entity (including, without limitation, any Contributor Plan and any liability under employment contracts with Contributor) allocable to services performed prior to the Closing Date. Contributor and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Contributor's employees or similar persons or entities, including, without limitation, any Contributor Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Contributor, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Contributor, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Contributor, nor will any repurchase of any of Contributor's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Contributor and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Contributor (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Contributor and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Contributor required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Contributor hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Contributor and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Contributor prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Contributor and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Contributor and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Contributor and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Contributor leases any of its premises from any Shareholder or other affiliate of Contributor or any shareholder of Contributor, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Contributor and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Contributor designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Contributor and Shareholders shall remain liable under any Contributor Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Contributor's employees incurred by Contributor prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that all employees of Contributor hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Contributor and shall be treated as Clinic employees for purposes of eligibility and participation in Contributor Plans. 4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS. Pentegra, Shareholders and Contributor agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Contributor and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Contributor and Shareholders shall furnish all information concerning Contributor and Shareholders as may be reasonable requested in connection with any such action. Contributor and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Contributor and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Contributor and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Contributor and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Contributor and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Contributor and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Contributor, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Contributor. Each Shareholder shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of Contributor under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and caused each shareholder of Contributor that has an existing employment agreement with Contributor to have terminated his or her employment agreement with Contributor and shall have executed an employment agreement ("Employment Agreement") with Contributor in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Contributor and Pentegra. 7.9 CONSENTS AND APPROVALS. Contributor and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Contributor and its shareholders or affiliates and Contributor shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Contributor and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Contributor since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Contributor and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Contributor shall have received all documents, duly executed in form satisfactory to Contributor and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. Within five business days after requested by Pentegra, Contributor and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Contributor authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) a bill of sale conveying the Assets to Pentegra; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (f) certificates of the Shareholders and a duly authorized officer of Contributor dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Contributor and Shareholder contained herein; (ii) as to the performance of and compliance by Contributor and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Contributor and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Contributor certifying as to the incumbency of the directors and officers of Contributor and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Contributor; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Contributor and any state of required foreign qualification of Contributor establishing that Contributor is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Contributor and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Contributor, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Contributor; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Contributor, in substantially the form attached hereto as EXHIBIT 9.1(L) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Contributor and Shareholder, the following, all of which shall be in a form satisfactory to counsel to Contributor and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Contributor; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, and other matters reasonably requested by Contributor; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Contributor to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Contributor and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD CONTRIBUTOR AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING CONTRIBUTOR AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. CONTRIBUTOR AND SHAREHOLDERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY CONTRIBUTOR OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE CONTRIBUTOR OR SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF CONTRIBUTOR OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF CONTRIBUTOR OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE CONTRIBUTOR OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Contributor or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Contributor or Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Contributor or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Contributor or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Contributor or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Contributor if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Contributor, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Contributor shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Contributor pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Contributor pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Contributor pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Contributor covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Contributor resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Contributor, Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Contributor, Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Contributor and Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Contributor and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Contributor or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Contributor and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Contributor and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Contributor and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Contributor or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Contributor and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Shareholders, Contributor and Pentegra shall be filed in a manner consistent with such intention and Contributor and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Contributor or Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Contributor or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Contributor. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF CONTRIBUTOR AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Contributor, be relieved from its obligations to Contributor under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Contributor, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Contributor and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Contributor or may demand from Contributor, and Contributor agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Contributors or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoenix, Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. Byron L. Novosad, D.D.S., Inc. By: /s/ Byron L. Novosad, D.D.S. ----------------------------------------- Its: President ----------------------------------------- PENTEGRA DENTAL GROUP, INC. By: /s/ James L. Dunn, Jr. ----------------------------------------- Its: Senior Vice President ----------------------------------------- /s/ Byron L. Novosad, D.D.S. -------------------------------------------- Byron L. Novosad, D.D.S. INDEX TO EXHIBITS
EXHIBIT DESCRIPTION ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice
EX-2.40 36 EXHIBIT 2.40 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., RANDY O'BRIEN, D.D.S., INC. AND RANDY O'BRIEN, D.D.S. TABLE OF CONTENTS
Page ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . 3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 12 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 12 Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 13 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 13 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 13 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 14 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 14 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS . . . . . . . . . . . . . 17 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 18 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 19 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 20 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . . . 21 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . 21 14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . 22 14.12 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.13 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.14 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.15 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.16 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), Randy O'Brien, D.D.S., Inc. ("Contributor") and Randy O'Brien, D.D.S., shareholders of Contributor (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Contributor operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra desires to receive from Contributor, certain assets of Contributor; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Contributor, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Contributor shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Contributor's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Contributor shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Contributor contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Contributor the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Contributor listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Contributor, including, but not limited to, liabilities arising under any Contributor Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by any Shareholder or Contributor, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Contributor reflected on the books of Contributor at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Contributor, any licensed professional employee or independent contractor of Contributor or any Shareholder, (vi) any liability for the payment of any taxes of Contributor or any Shareholder, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Contributor or any Shareholder. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, Contributor and Shareholders shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS. Contributor and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Contributor is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Texas. Contributor has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Contributor does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Contributor a party to any joint venture or partnership. The Shareholders are the sole shareholders of Contributor and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Contributor's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Contributor are owned by Contributor in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Contributor on any matter, (b) securities of Contributor convertible into equity interests in Contributor, or (c) commitments, options, rights or warrants to issue any such equity interests in Contributor, to issue securities of Contributor convertible into such equity interests, or to redeem any securities of Contributor. No shares of capital stock of Contributor have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Contributor's stockholders. Contributor is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Contributor does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Contributor has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Contributor and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Contributor and Shareholders, enforceable against Contributor and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Contributor or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Contributor or any Shareholder is a party or by which Contributor or any Shareholder is bound, or violate any material restrictions of any kind to which Contributor is subject, or result in any lien or encumbrance on any of Contributor's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Contributor and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Contributor or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Contributor on any of its capital stock since the Balance Sheet Date. No repurchase of any of Contributor's capital stock has been approved, effected or is pending, or is contemplated by Contributor. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Contributor and all amendments thereto have been delivered to Pentegra. The minute books of Contributor contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Contributor since its formation. The books of account of Contributor have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Contributor have been properly recorded in such books. 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Contributor as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Contributor. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Contributor or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Contributor, as lessor or lessee, or any condition or event of which any Shareholder or Contributor has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Contributor or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Contributor and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Contributor, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Contributor has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Contributor, including the names of any entities from whom Contributor previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Contributor is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Contributor in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Contributor has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Contributor and the offices held by each, (b) the most recent payroll report of Contributor, showing all current employees of Contributor and their current levels of compensation, (c) promised increases in compensation of employees of Contributor that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Contributor is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Contributor is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Contributor has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Contributor, and Contributor has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Contributor nor the Business nor any of the Assets is subject to any pending, nor does Contributor or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Contributor, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Contributor and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Contributor or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Contributor ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Contributor or any Shareholder, or any condition or event of which Contributor or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Contributor and Shareholders have no knowledge of any default by any other party to such Contracts. Contributor and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Contributor are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Contributor or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Contributor on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Contributor has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Contributor since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Contributor; (o) Repurchased, approved any repurchase or agreed to repurchase any of Contributor's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Contributor has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Contributor has not received any notice that any tax deficiency or delinquency has been or may be asserted against Contributor. There are no audits relating to taxes of Contributor pending or in process or, to the knowledge of Contributor, threatened. Contributor is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Contributor. Contributor has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Contributor nor any predecessor of Contributor is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Contributor has delivered to Pentegra correct and complete copies of Contributor's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Contributor during the three calendar year period preceding the date of this Agreement. Contributor has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Contributor does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Contributor and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Contributor from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Contributor or Contributor's shareholders resulting from any action taken by Contributor or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Contributor did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Contributor and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Contributor or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Contributor (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Contributor, each Shareholder and each licensed professional of Contributor carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Contributor have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Contributor, nor any Shareholder nor any licensed professional employee of Contributor has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Contributor has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Contributor Plan," and collectively "Contributor Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Contributor has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Contributor Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Contributor Plans. Contributor has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Contributor Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Shareholders and Contributor's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Contributor, any Shareholder or any licensed professional employee of Contributor of any Federal, state or local law or regulation. Contributor and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Contributor. 2.24 THIRD PARTY PAYORS. Contributor, Shareholders and each licensed professional employee or independent contractor of Contributor has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Contributor, any Shareholder and each licensed professional employee of Contributor. Neither Contributor, nor any Shareholder, nor any licensed professional employee of Contributor has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Contributor, Shareholders and Contributor's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Contributor or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Contributor or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Contributor has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Contributor, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Contributor or any organization that has a material contract or arrangement with Contributor. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Contributor's services which accounted for more than 10% of revenues of Contributor in the preceding fiscal year. Contributor has good relations with all such payors and other material payors of Contributor and none of such payors has notified Contributor that it intends to discontinue its relationship with Contributor or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Contributor and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Pentegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Contributor or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS. Contributor and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Contributor and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Contributor and Shareholders shall operate the Business and use the Assets in the ordinary course. Contributor and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Contributor and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Contributor and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Contributor. Contributor and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Contributor and Shareholders shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Contributor and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Contributor, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Contributor, the Business or the Assets as Pentegra or its representatives may request. Contributor and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Contributor is a party or relating to the Business or the Assets, and (b) any adverse change in Contributor's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Contributor and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of Contributor contemplated by the Service Agreement and to conduct the intended business of Contributor and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Contributor and Shareholders shall not, and shall use its best efforts to cause Contributor's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Contributor or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Contributor and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Contributor and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Contributor or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Contributor to any employee or other person or entity (including, without limitation, any Contributor Plan and any liability under employment contracts with Contributor) allocable to services performed prior to the Closing Date. Contributor and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Contributor's employees or similar persons or entities, including, without limitation, any Contributor Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Contributor, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Contributor, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Contributor, nor will any repurchase of any of Contributor's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Contributor and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Contributor (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Contributor and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Contributor required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Contributor hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Contributor and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Contributor prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Contributor and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Contributor and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Contributor and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Contributor leases any of its premises from any Shareholder or other affiliate of Contributor or any shareholder of Contributor, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Contributor and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Contributor designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Contributor and Shareholders shall remain liable under any Contributor Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Contributor's employees incurred by Contributor prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that all employees of Contributor hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Contributor and shall be treated as Clinic employees for purposes of eligibility and participation in Contributor Plans. 4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS. Pentegra, Shareholders and Contributor agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Contributor and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Contributor and Shareholders shall furnish all information concerning Contributor and Shareholders as may be reasonable requested in connection with any such action. Contributor and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Contributor and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Contributor and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Contributor and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Contributor and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Contributor and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Contributor, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Contributor. Each Shareholder shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of Contributor under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and caused each shareholder of Contributor that has an existing employment agreement with Contributor to have terminated his or her employment agreement with Contributor and shall have executed an employment agreement ("Employment Agreement") with Contributor in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Contributor and Pentegra. 7.9 CONSENTS AND APPROVALS. Contributor and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Contributor and its shareholders or affiliates and Contributor shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Contributor and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Contributor since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Contributor and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Contributor shall have received all documents, duly executed in form satisfactory to Contributor and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. Within five business days after requested by Pentegra, Contributor and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Contributor authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) a bill of sale conveying the Assets to Pentegra; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (f) certificates of the Shareholders and a duly authorized officer of Contributor dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Contributor and Shareholder contained herein; (ii) as to the performance of and compliance by Contributor and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Contributor and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Contributor certifying as to the incumbency of the directors and officers of Contributor and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Contributor; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Contributor and any state of required foreign qualification of Contributor establishing that Contributor is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Contributor and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Contributor, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Contributor; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Contributor, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Contributor and Shareholder, the following, all of which shall be in a form satisfactory to counsel to Contributor and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Contributor; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Contributor; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Contributor to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Contributor and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD CONTRIBUTOR AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING CONTRIBUTOR AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. CONTRIBUTOR AND SHAREHOLDERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY CONTRIBUTOR OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE CONTRIBUTOR OR SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF CONTRIBUTOR OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF CONTRIBUTOR OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE CONTRIBUTOR OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Contributor or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Contributor or Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Contributor or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Contributor or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Contributor or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Contributor if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Contributor, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Contributor shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Contributor pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Contributor pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Contributor pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Contributor covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Contributor resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Contributor, Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Contributor, Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Contributor and Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Contributor and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Contributor or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Contributor and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Contributor and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Contributor and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Contributor or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Contributor and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Shareholders, Contributor and Pentegra shall be filed in a manner consistent with such intention and Contributor and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Contributor or Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Contributor or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Contributor. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF CONTRIBUTOR AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Contributor, be relieved from its obligations to Contributor under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Contributor, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Contributor and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Contributor or may demand from Contributor, and Contributor agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Contributors or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoenix, Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. Randy O'Brien, D.D.S., Inc. By: /s/ Randy O'Brien, D.D.S. ------------------------------------------- Its: ------------------------------------------ PENTEGRA DENTAL GROUP, INC. By: /s/ James L. Dunn, Jr. ------------------------------------------- Its: Senior Vice President ------------------------------------------ /s/ Randy O'Brien, D.D.S. ---------------------------------------------- Randy O'Brien, D.D.S. INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.41 37 EXHIBIT 2.41 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., AND TERRENCE C. O'KEEFE, D.D.S. TABLE OF CONTENTS
Page ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. 2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . 2 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 3 2.4 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . 3 2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . 3 2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . 3 2.8 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 3 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . 3 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . 3 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . 6 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.20 INSURANCE POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.21 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . 6 2.22 ADVERSE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . 7 2.24 THIRD PARTY PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 7 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS . . . . . . . 8 2.28 PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING . . . . . . . . . . . . . . . . . 8 3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . 8 3.3 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . 8 3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 8 Section 4. COVENANTS OF DENTIST. 4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . 9 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 9 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 9 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . 9 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . 9 4.7 EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . 10 4.9 REQUIREMENTS TO EFFECT ACQUISITION . . . . . . . . . . . . . . . . . 10 4.10 ACCOUNTING AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . 10 4.11 WAIVER OF BULK TRANSFER COMPLIANCE . . . . . . . . . . . . . . . . . 10 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . 10 4.14 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . 10 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . 10 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.18 POWER AND AUTHORITY FOR TRANSACTIONS . . . . . . . . . . . . . . . . 11 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.20 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . 11 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 11 Section 6. COVENANTS OF PENTEGRA AND DENTIST 6.1 FILINGS; OTHER ACTIONS . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . 12 7.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . 12 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.4 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . 12 7.5 DUE DILIGENCE REVIEW . . . . . . . . . . . . . . . . . . . . . . . . 12 7.6 APPROVAL BY THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . 12 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . 13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . 13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.13 NO CHANGE IN WORKING CAPITAL . . . . . . . . . . . . . . . . . . . . 13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 8. DENTIST'S CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . 13 8.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . 13 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.4 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . 15 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY DENTIST . . . . . . . . . . . . . . . . . . . . . 16 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . 17 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 18 12.2 INVESTMENTS; COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . 19 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . 20 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . 21 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . 21 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . 21 14.12 NO RULE OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . 21 14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . 21 14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.15 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . 21 14.16 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra") and Terrence C. O'Keefe, D.D.S. ("Dentist"). WITNESSETH: WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires to receive from Dentist, certain assets of Dentist; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Dentist, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Dentist shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Dentist's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Dentist shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Dentist contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Dentist the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Dentist, including, but not limited to, liabilities arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by Dentist, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Dentist reflected on the books of Dentist at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Dentist, any licensed professional employee or independent contractor of Dentist, (vi) any liability for the payment of any taxes of Dentist, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Dentist. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Dentist shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. Dentist hereby represents and warrants to Pentegra as follows: 2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the State of Texas. Dentist does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Dentist and constitute or will constitute the legal, valid and binding obligations of Dentist in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Dentist is a party or by which Dentist is bound, or violate any material restrictions of any kind to which Dentist is subject, or result in any lien or encumbrance on any of Dentist's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All material building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Dentist, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Dentist. 2.5 [INTENTIONALLY DELETED]. 2.6 [INTENTIONALLY DELETED]. 2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Dentist as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Dentist. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Dentist leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Dentist, as lessor or lessee, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Dentist has not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Dentist has no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. Pentegra acknowledges that it has acquired the assets "where and as is" relying solely upon Pentegra's own examination. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Dentist, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Dentist has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Dentist, including the names of any entities from whom Dentist previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Dentist in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Dentist has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the most recent payroll report of Dentist, showing all current employees of Dentist and their current levels of compensation, (b) promised increases in compensation of employees of Dentist that have not yet been effected, (c) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Dentist is a party, copies of which have been delivered to Pentegra, and (d) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Dentist is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Dentist has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Dentist, and Dentist has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Except as set forth on Exhibit 2.16, neither Dentist nor the Business nor any of the Assets is subject to any pending, nor does Dentist have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Dentist, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Dentist, no basis for any such action exists, nor is there any legal impediment of which Dentist has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Dentist ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Dentist, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default. Dentist has no knowledge of any default by any other party to such Contracts. Dentist has not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Dentist, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Dentist on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement, other than in the course of business; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (d) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (e) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Dentist since the Balance Sheet Date; (f) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (g) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (h) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (i) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (j) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (k) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; or (l) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports and other statements) required to have been filed by it or have been properly extended, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Dentist has not received any notice that any tax deficiency or delinquency has been or may be asserted against Dentist. There are no audits relating to taxes of Dentist pending or in process or, to the knowledge of Dentist, threatened. Dentist is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Dentist. Dentist has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Dentist nor any predecessor of Dentist is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Dentist has delivered to Pentegra correct and complete copies of Dentist's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Dentist during the three calendar year period preceding the date of this Agreement. Dentist has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Dentist does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Nothing contained herein shall prohibit Dentist from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Dentist resulting from any action taken by Dentist or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any material liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Dentist does not know, or have reasonable grounds to know, of any basis for the assertion against Dentist as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Dentist (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Dentist has not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Dentist nor any licensed professional employee of Dentist has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Dentist has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. To the best of the Dentist's knowledge, no act or failure to act by Dentist has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Dentist Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Dentist Plans. Dentist has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Dentist Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Dentist or any licensed professional employee of Dentist of any Federal, state or local law or regulation. Dentist has not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Dentist. 2.24 THIRD PARTY PAYORS. Dentist and each licensed professional employee or independent contractor of Dentist has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Dentist and each licensed professional employee of Dentist. Neither Dentist nor any licensed professional employee of Dentist has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Dentist and Dentist's licensed professional employees have not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by Dentist or to be furnished by Dentist to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Dentist has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or employee (or their respective spouses, children or affiliates) owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Dentist or any organization that has a material contract or arrangement with Dentist. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Dentist's services which accounted for more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has good relations with all such payors and other material payors of Dentist and none of such payors has notified Dentist that it intends to discontinue its relationship with Dentist or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Dentist as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Pentegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF DENTIST. Dentist agrees that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Dentist agrees to complete the Exhibits hereto to be provided by him in form and substance satisfactory to both Dentist and Pentegra. 4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the Assets in the ordinary course. Dentist shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Dentist shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Dentist shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Dentist. Dentist shall collect its receivables and pay its trade payables in the ordinary course of business. Dentist shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Dentist, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Dentist, the Business or the Assets as Pentegra or its representatives may request. Dentist shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Dentist is a party or relating to the Business or the Assets, and (b) any adverse change in Dentist's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall use his best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Dentist shall not, and shall use its best efforts to cause Dentist's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to the Dentist, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Dentist or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Dentist will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Dentist shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Dentist or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Dentist to any employee or other person or entity (including, without limitation, any Dentist Plan and any liability under employment contracts with Dentist) allocable to services performed prior to the Closing Date. Dentist acknowledges that the purpose and intent of this covenant is to assure that Pentegra shall have no liability whatsoever at any time after the Closing Date with respect to any of Dentist's employees or similar persons or entities, including, without limitation, any Dentist Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of the Dentist (other than in the ordinary course of business) or other employee or an independent contractor of Dentist, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Dentist, its business, assets or prospects. 4.8 [INTENTIONALLY OMITTED]. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material respect the tax or financial accounting methods or practices followed by Dentist (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Dentist will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Dentist required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Dentist covenants and agrees that all of the creditors with respect to the Business and the Assets will be paid in full by Dentist prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Dentist may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Dentist agrees to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Dentist leases any of its premises from the Dentist or other affiliate of Dentist, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Dentist employed by the Dentist as of the Closing Date, with such employment to be effective as of the Closing Date. Notwithstanding the above, Dentist shall remain liable under any Dentist Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Dentist's employees incurred by Dentist prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and shall be treated as Clinic employees for purposes of eligibility and participation in Dentist Plans. 4.15 INSURANCE. Dentist shall agree to have and shall assist Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited liability company, partnership or other legal entity (the "Practice") for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the Dentist and the Practice are to practice dentistry. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Dentist shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall qualify to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice on the Closing Date and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and has filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra and Dentist agree to complete the Exhibits hereto to be provided by both parties. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND DENTIST. Pentegra and Dentist agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Dentist shall furnish all information concerning Dentist as may be reasonable requested in connection with any such action. Dentist represents and warrants that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Dentist shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Dentist shall furnish Pentegra will all information concerning itself and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Dentist contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Dentist prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Dentist, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a mutually agreeable Service Agreement (the "Service Agreement"), which may be in the form attached hereto as EXHIBIT 7.7, and otherwise satisfactory to Dentist and Pentegra, pursuant to which Pentegra will provide management services to the Practice. Dentist shall have executed and delivered a mutually agreeable Guaranty Agreement which may be in the form attached as EXHIBIT 4.10, and otherwise satisfactory to Dentist and Pentegra, of the Service Agreement pursuant to which Dentist shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her employment agreement and executed a mutually agreeable employment agreement ("Employment Agreement") with the Practice which may be in the form attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra. 7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Dentist and its affiliates and Dentist shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured on its liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Dentist since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. DENTIST'S CONDITIONS PRECEDENT. The obligations of Dentist hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly executed in form satisfactory to Dentist and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF DENTIST. On or before the Closing Date, Dentist shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a bill of sale conveying the Assets to Pentegra; (d) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (e) certificates of Dentist dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Dentist contained herein; (ii) as to the performance of and compliance by Dentist with all covenants contained herein; and (iii) certifying that all conditions precedent of Dentist to the Closing have been satisfied; (f) an opinion of counsel to Dentist opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Dentist, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (g) non-foreign affidavits executed by Dentist; (h) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (i) an executed Registration Rights Agreement between Pentegra and Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (j) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Dentist the following, all of which shall be in a form satisfactory to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Dentist; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Dentist; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Dentist to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Dentist or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. (D) ANY LIABILITY OF PENTEGRA FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEY'S FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Dentist giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Dentist contained in this Agreement or in any certificate or other document executed and delivered by Dentist pursuant to this Agreement is or becomes untrue or breached in any material respect or if Dentist fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Dentist if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra or Dentist if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Dentist, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received as consideration by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, received by any party hereunder as consideration, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, received by any party hereunder as consideration, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Dentist pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the shares of Pentegra Common Stock to be delivered to Dentist pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Dentist covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Dentist resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect its own interests in connection with the acquisition of the Pentegra Common Stock. Dentist and its representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Dentist and its representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Dentist is an "accredited investor" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes and acknowledges that it had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is a valuable, special and unique asset of Pentegra's businesses. Dentist agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Dentist, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Dentist shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Dentist reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Dentist is the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Dentist from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. Pentegra recognizes and acknowledges that it had in the past, currently have, and in the future may possibly have, access to certain confidential information of Dentist that is a valuable, special and unique asset of Dentist. Pentegra agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Pentegra, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Pentegra shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Pentegra reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Pentegra is the sole and exclusive owner of such confidential information as a result of the transaction contemplated hereunder or otherwise. In the event of a breach or threatened breach by Pentegra of the provision of this SECTION 13. Dentist shall be entitled to an injunction restraining Pentegra from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Dentist and Pentegra shall be filed in a manner consistent with such intention and Dentist and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Dentist: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Dentist for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Dentist. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF TEXAS AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS AND THE ESCROW LETTER ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Dentist, be relieved from its obligations to Dentist under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Dentist, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoenix, Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. PENTEGRA DENTAL GROUP, INC. By: /s/ James L. Dunn, Jr. ------------------------------- Its: Senior Vice President ------------------------------- /s/ Terrence C. O'Keefe, D.D.S. ----------------------------------- Terrence C. O'Keefe, D.D.S. INDEX TO EXHIBITS Exhibit Description - ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 [intentionally omitted] 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.42 38 EXHIBIT 2.42 AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG PENTEGRA DENTAL GROUP, INC., HAROLD A. PEBBLES, D.D.S., P.C., and HAROLD PEBBLES, D.D.S. TABLE OF CONTENTS
Page ---- Section 1. TERMS OF THE REORGANIZATION 1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . . . . 2 1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 4 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 9 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 12 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . 13 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 13 Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 14 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 14 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 14 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 14 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 14 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 15 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 15 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 15 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . . . . 15 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 17 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . . . 18 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 19 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 20 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 20 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 21 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . . . 22 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . 22 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . 23 14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), HAROLD A. PEBBLES, D.D.S., P.C., a Washington professional corporation ("Company") and HAROLD PEBBLES, D.D.S., shareholders of Company (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Company operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, the Boards of Directors of the Company and Pentegra have determined that a reorganization between each of them is in the best interests of their respective companies; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Company, the "Target Companies") and simultaneously with the closing of the reorganization contemplated herein, intends to consummate its initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock"); WHEREAS, it is intended for Federal income tax purposes that the reorganization contemplated by this Agreement shall qualify as an reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. . NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE REORGANIZATION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 MERGER. Subject to and upon the terms and conditions contained herein, on the Closing Date, the Company shall be merged with and into Pentegra (or its designated affiliate, in which case, the references herein to Pentegra shall be to such designated affiliate and its shares of common stock) in accordance with this Agreement and the separate corporate existence of the Company shall thereupon cease ("Merger"). Pentegra shall be the surviving corporation in the Merger ("Surviving Corporation") and shall continue to be governed by the laws of the State of Delaware and the separate corporate existence of Pentegra with all rights, privileges, powers, immunities and purposes shall continue unaffected by the Merger. The Merger shall have the effects specified in the Delaware General Corporation Law and the Washington Business Corporation Law. If all the conditions to the Merger set forth herein shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated in accordance herewith, the parties hereto shall cause to be properly executed and filed on the Closing Date Certificates of Merger for the Company meeting the applicable legal requirements. The Mergers shall become effective on the Closing Date or the filing of such documents, in accordance with applicable law, or at such later time as the parties hereto have agreed upon and designated in such merger filings. 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation until duly amended in accordance with their terms. 1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra immediately prior to the effective date of the Merger shall be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. The persons who are officers of Pentegra immediately prior to the effective date of the Merger shall be the officers of the Surviving Corporation and shall hold their respective offices until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal. 1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and without any action on the part of the holder thereof, all shares of the Company's common stock issued and outstanding on the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired and shall cease to exist, and each holder of a certificate of representing shares of Company common stock shall thereafter cease to have any rights with respect to such shares except the right to receive the consideration set forth on ANNEX I attached hereto (the "Merger Consideration"). Each share of common stock of the Company held in treasury at the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired without payment of any consideration therefor. On the effective date of the Merger, each share of Pentegra Common Stock issued and outstanding shall, by virtue of he Mergers, and without any action on the part of the holder thereof, continue unchanged and remain outstanding as a share of validly issued, fully paid and nonassessable share of Surviving Corporation common stock. 1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger, the Shareholders, as the holders of a certificate or certificates representing shares of Company common stock shall, upon surrender of such certificate or certificates, receive the Merger Consideration, and until the certificate or certificates of Company common stock shall have been surrendered by the Shareholder and replaced by a certificate or certificates representing Pentegra Common Stock (as set forth on ANNEX I), the certificate or certificates of Company common stock shall, for all purposes be deemed to evidence ownership of the number of shares of Pentegra Common Stock determined in accordance with the provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the Shareholders in the Merger shall be deemed for all purposes to have been issued by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at Closing the certificate or certificates representing the Company common stock owned by them, duly endorsed in blank by the Shareholders, or accompanied by duly executed blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the Shareholder's expense, affixed and cancelled. 1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Company and Shareholders shall excecute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Washington. Company has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Company does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Company a party to any joint venture or partnership. The Shareholders are the sole shareholders of Company and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Company are owned by Company in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Company on any matter, (b) securities of Company convertible into equity interests in Company, or (c) commitments, options, rights or warrants to issue any such equity interests in Company, to issue securities of Company convertible into such equity interests, or to redeem any securities of Company. No shares of capital stock of Company have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Company's stockholders. Company is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Company does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Company has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Company and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Company and Shareholders, enforceable against Company and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Company or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Company or any Shareholder is a party or by which Company or any Shareholder is bound, or violate any material restrictions of any kind to which Company is subject, or result in any lien or encumbrance on any of Company's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Company and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Company or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Company on any of its capital stock since the Balance Sheet Date. No repurchase of any of Company's capital stock has been approved, effected or is pending, or is contemplated by Company. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Company and all amendments thereto have been delivered to Pentegra. The minute books of Company contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Company since its formation. The books of account of Company have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Company have been properly recorded in such books. 2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Company as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Company. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Company or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Company, as lessor or lessee, or any condition or event of which any Shareholder or Company has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Company or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Company and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Company, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Company has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Company, including the names of any entities from whom Company previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Company in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Company has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Company and the offices held by each, (b) the most recent payroll report of Company, showing all current employees of Company and their current levels of compensation, (c) promised increases in compensation of employees of Company that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Company is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Company is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Company has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Company, and Company has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the Business nor any of the Assets is subject to any pending, nor does Company or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Company, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Company and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Company or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Company has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Company ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Company or any Shareholder, or any condition or event of which Company or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Company and Shareholders have no knowledge of any default by any other party to such Contracts. Company and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Company or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Company on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Company since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Company; (o) Repurchased, approved any repurchase or agreed to repurchase any of Company's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Company has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Company has not received any notice that any tax deficiency or delinquency has been or may be asserted against Company. There are no audits relating to taxes of Company pending or in process or, to the knowledge of Company, threatened. Company is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Company. Company has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Company nor any predecessor of Company is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Company has delivered to Pentegra correct and complete copies of Company's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Company during the three calendar year period preceding the date of this Agreement. Company has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) No Shareholder presently intends to dispose of any of the shares of Pentegra Common Stock to be received hereunder nor is a party to any plan, arrangement or agreement for the disposition of such shares. Company and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Shareholders from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Company or Company's shareholders resulting from any action taken by Company or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Company or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Company (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed professional of Company carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Company have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Company, nor any Shareholder nor any licensed professional employee of Company has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Company has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company Plan," and collectively "Company Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Company has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Company Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Company Plans. Company has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Company Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Company, any Shareholder or any licensed professional employee of Company of any Federal, state or local law or regulation. Company and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Company. 2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed professional employee or independent contractor of Company has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Company, any Shareholder and each licensed professional employee of Company. Neither Company, nor any Shareholder, nor any licensed professional employee of Company has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Company, Shareholders and Company's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Company or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Company has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Company, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Company or any organization that has a material contract or arrangement with Company. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Company's services which accounted for more than 10% of revenues of Company in the preceding fiscal year. Company has good relations with all such payors and other material payors of Company and none of such payors has notified Company that it intends to discontinue its relationship with Company or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Company and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the reorganization contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the reorganization contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Company or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Company and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the Business and use the Assets in the ordinary course. Company and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Company and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Company and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Company. Company and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Company and Shareholdes shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Company, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Company, the Business or the Assets as Pentegra or its representatives may request. Company and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Company is a party or relating to the Business or the Assets, and (b) any adverse change in Company's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Company and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Company and Shareholders shall not, and shall use its best efforts to cause Company's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Company or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Company and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Company and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Company or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Company to any employee or other person or entity (including, without limitation, any Company Plan and any liability under employment contracts with Company) allocable to services performed prior to the Closing Date. Company and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Company's employees or similar persons or entities, including, without limitation, any Company Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Company shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Company, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Company, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Company, nor will any repurchase of any of Company's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the reorganization contemplated hereby under applicable law. The Company and Shareholders shall cause the amendment of the Articles of Incoporation of the Company to change the purpose of the corporation from the practice of dentistry to general corporate purposes and execute all necessary documentation to evidence such amendment in order to effectuate the reorganization contemplated hereby. 4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Company (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Company and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Company required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Company hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Company and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Company prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Company and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Company and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Company leases any of its premises from any Shareholder or other affiliate of Company or any shareholder of Company, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dentist employees of Company designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Company and Shareholders shall remain liable under any Company Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Company's employees incurred by Company prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Company and shall be treated as Clinic employees for purposes of eligibility and participation in Company Plans. 4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the practice of dentistry is conducted by the Shareholders and the Practice. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Shareholders shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. The Company shall have transferred the Excluded Assets set forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for equity interest in the Practice, and the Company shall have distributed such equity interests in the Practice to the Shareholders. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and have filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS. Pentegra, Shareholders and Company agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Company and Shareholders shall furnish all information concerning Company and Shareholders as may be reasonable requested in connection with any such action. Company and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Company and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Company and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Company and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Company and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Company, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Each Shareholder shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused each shareholder of Company that has an existing employment agreement with Company to have terminated his or her employment agreement with Company and shall have executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Company and Pentegra. 7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Company and its shareholders or affiliates and Company shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Company since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Company and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Company shall have received all documents, duly executed in form satisfactory to Company and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days after requested by Pentegra, Company and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Company authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) executed merger certificate and/or plan as required by applicable state law; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra and the original stock certificates together with blank stock powers representing the outstanding shares of Company common stock; (f) certificates of the Shareholders and a duly authorized officer of Company dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Company and Shareholder contained herein; (ii) as to the performance of and compliance by Company and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Company and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Company certifying as to the incumbency of the directors and officers of Company and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Company; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Company and any state of required foreign qualification of Company establishing that Company is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Company and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Company, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Company; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Company and Shareholders, the following, all of which shall be in a form satisfactory to counsel to Company and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Merger Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Company; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Company; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Company to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Company and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Company or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Company or any Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Company or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Company or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Company or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Company if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Company, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Company pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Company pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Each Shareholder covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Company resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Company and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Company or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Company and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Company and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Company and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Company and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement will qualify as a reorganization within the meaning of Section 368(a) of the Code. The tax returns (and schedules thereto) of Shareholders, Company and Pentegra shall be filed in a manner consistent with such intention and Shareholders and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Company and Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Company or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Company. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Company, be relieved from its obligations to Company under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Company, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Company and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Company or may demand from Company, and Company agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Companys or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. HAROLD A. PEBBLES, D.D.S, P.C. By: /s/ Harold A. Pebbles, D.D.S. ----------------------------------------- Harold A. Pebbles, D.D.S., President PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman ----------------------------------------- Its: Senior Vice President ----------------------------------------- /s/ Harold Pebbles, D.D.S. -------------------------------------------- Harold Pebbles, D.D.S. INDEX TO EXHIBITS
Exhibit Description ------- ----------- Annex I Merger Consideration A Target Companies 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 4.16 Excluded Assets and Excluded Liabilities 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice
EX-2.43 39 EXHIBIT 2.43 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., AND JIMMY F. PINNER, D.D.S. TABLE OF CONTENTS
Page ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. 2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . 3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . . 3 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . . 3 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . . 7 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . . 8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . . 8 3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 4. COVENANTS OF DENTIST. 4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 9 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . . 9 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . . 10 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 10 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . . 10 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . . 11 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 11 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 11 Section 6. COVENANTS OF PENTEGRA AND DENTIST 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 12 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . . 12 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . 12 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . . 13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . 13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 8. DENTIST'S CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 13 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . . . . . . . 16 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . 17 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . . 19 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . . 21 14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.12 NO RULE OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.13 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.14 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.15 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.16 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.17 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra") and Jimmy F. Pinner, D.D.S. ("Dentist"). WITNESSETH: WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires to receive from Dentist, certain assets of Dentist; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Dentist, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. . NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Dentist shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Dentist's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Dentist shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Dentist contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Dentist the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Dentist, including, but not limited to, liabilities arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by Dentist, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Dentist reflected on the books of Dentist at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Dentist, any licensed professional employee or independent contractor of Dentist, (vi) any liability for the payment of any taxes of Dentist, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Dentist. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Dentist shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. Dentist hereby represents and warrants to Pentegra as follows: 2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the State of Texas. Dentist does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Dentist and constitute or will constitute the legal, valid and binding obligations of Dentist in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Dentist is a party or by which Dentist is bound, or violate any material restrictions of any kind to which Dentist is subject, or result in any lien or encumbrance on any of Dentist's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All material building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Dentist, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Dentist. 2.5 [INTENTIONALLY DELETED]. 2.6 [INTENTIONALLY DELETED]. 2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Dentist as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Dentist. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Dentist leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Dentist, as lessor or lessee, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Dentist has not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Dentist has no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. Pentegra acknowledges that it has acquired the assets "where and as is" relying solely upon Pentegra's own examination. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Dentist, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Dentist has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Dentist, including the names of any entities from whom Dentist previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Dentist in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Dentist has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the most recent payroll report of Dentist, showing all current employees of Dentist and their current levels of compensation, (b) promised increases in compensation of employees of Dentist that have not yet been effected, (c) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Dentist is a party, copies of which have been delivered to Pentegra, and (d) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Dentist is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Dentist has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Dentist, and Dentist has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Except as set forth on Exhibit 2.16, neither Dentist nor the Business nor any of the Assets is subject to any pending, nor does Dentist have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Dentist, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Dentist, no basis for any such action exists, nor is there any legal impediment of which Dentist has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Dentist ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Dentist, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default. Dentist has no knowledge of any default by any other party to such Contracts. Dentist has not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Dentist, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Dentist on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement, other than in the course of business; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (d) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (e) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Dentist since the Balance Sheet Date; (f) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (g) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (h) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (i) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (j) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (k) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; or (l) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports and other statements) required to have been filed by it or have been properly extended, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Dentist has not received any notice that any tax deficiency or delinquency has been or may be asserted against Dentist. There are no audits relating to taxes of Dentist pending or in process or, to the knowledge of Dentist, threatened. Dentist is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Dentist. Dentist has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Dentist nor any predecessor of Dentist is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Dentist has delivered to Pentegra correct and complete copies of Dentist's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Dentist during the three calendar year period preceding the date of this Agreement. Dentist has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Dentist does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Nothing contained herein shall prohibit Dentist from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Dentist resulting from any action taken by Dentist or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any material liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Dentist does not know, or have reasonable grounds to know, of any basis for the assertion against Dentist as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Dentist (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Dentist has not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Dentist nor any licensed professional employee of Dentist has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Dentist has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. To the best of the Dentist's knowledge, no act or failure to act by Dentist has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Dentist Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Dentist Plans. Dentist has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Dentist Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Dentist or any licensed professional employee of Dentist of any Federal, state or local law or regulation. Dentist has not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Dentist. 2.24 THIRD PARTY PAYORS. Dentist and each licensed professional employee or independent contractor of Dentist has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Dentist and each licensed professional employee of Dentist. Neither Dentist nor any licensed professional employee of Dentist has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Dentist and Dentist's licensed professional employees have not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by Dentist or to be furnished by Dentist to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Dentist has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or employee (or their respective spouses, children or affiliates) owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Dentist or any organization that has a material contract or arrangement with Dentist. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Dentist's services which accounted for more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has good relations with all such payors and other material payors of Dentist and none of such payors has notified Dentist that it intends to discontinue its relationship with Dentist or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Dentist as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Pentegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF DENTIST. Dentist agrees that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Dentist agrees to complete the Exhibits hereto to be provided by him in form and substance satisfactory to both Dentist and Pentegra. 4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the Assets in the ordinary course. Dentist shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Dentist shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Dentist shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Dentist. Dentist shall collect its receivables and pay its trade payables in the ordinary course of business. Dentist shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Dentist, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Dentist, the Business or the Assets as Pentegra or its representatives may request. Dentist shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Dentist is a party or relating to the Business or the Assets, and (b) any adverse change in Dentist's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall use his best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Dentist shall not, and shall use its best efforts to cause Dentist's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to the Dentist, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Dentist or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Dentist will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Dentist shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Dentist or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Dentist to any employee or other person or entity (including, without limitation, any Dentist Plan and any liability under employment contracts with Dentist) allocable to services performed prior to the Closing Date. Dentist acknowledges that the purpose and intent of this covenant is to assure that Pentegra shall have no liability whatsoever at any time after the Closing Date with respect to any of Dentist's employees or similar persons or entities, including, without limitation, any Dentist Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of the Dentist (other than in the ordinary course of business) or other employee or an independent contractor of Dentist, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Dentist, its business, assets or prospects. 4.8 [INTENTIONALLY OMITTED]. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material respect the tax or financial accounting methods or practices followed by Dentist (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Dentist will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Dentist required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Dentist covenants and agrees that all of the creditors with respect to the Business and the Assets will be paid in full by Dentist prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Dentist may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Dentist agrees to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Dentist leases any of its premises from the Dentist or other affiliate of Dentist, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Dentist employed by the Dentist as of the Closing Date with such employment to be effective as of the Closing Date. Notwithstanding the above, Dentist shall remain liable under any Dentist Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Dentist's employees incurred by Dentist prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and shall be treated as Clinic employees for purposes of eligibility and participation in Dentist Plans. 4.15 INSURANCE. Dentist shall agree to have and shall assist Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited liability company, partnership or other legal entity (the "Practice") for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the Dentist and the Practice are to practice dentistry. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Dentist shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall qualify to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice on the Closing Date and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and has filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra and Dentist agree to complete the Exhibits hereto to be provided by both parties. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND DENTIST. Pentegra and Dentist agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Dentist shall furnish all information concerning Dentist as may be reasonable requested in connection with any such action. Dentist represents and warrants that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Dentist shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Dentist shall furnish Pentegra will all information concerning itself and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Dentist contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Dentist prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Dentist, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a mutually agreeable Service Agreement (the "Service Agreement"), which may be in the form attached hereto as EXHIBIT 7.7, and otherwise satisfactory to Dentist and Pentegra, pursuant to which Pentegra will provide management services to the Practice. Dentist shall have executed and delivered a mutually agreeable Guaranty Agreement which may be in the form attached as EXHIBIT 4.10, and otherwise satisfactory to Dentist and Pentegra, of the Service Agreement pursuant to which Dentist shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her employment agreement and executed a mutually agreeable employment agreement ("Employment Agreement") with the Practice which may be in the form attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra. 7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Dentist and its affiliates and Dentist shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured on its liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Dentist since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. DENTIST'S CONDITIONS PRECEDENT. The obligations of Dentist hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly executed in form satisfactory to Dentist and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF DENTIST. On or before the Closing Date, Dentist shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a bill of sale conveying the Assets to Pentegra; (d) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (e) certificates of Dentist dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Dentist contained herein; (ii) as to the performance of and compliance by Dentist with all covenants contained herein; and (iii) certifying that all conditions precedent of Dentist to the Closing have been satisfied; (f) an opinion of counsel to Dentist opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Dentist, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (g) non-foreign affidavits executed by Dentist; (h) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (i) an executed Registration Rights Agreement between Pentegra and Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (j) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Dentist the following, all of which shall be in a form satisfactory to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Dentist; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Dentist; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Dentist to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Dentist or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. (D) ANY LIABILITY OF PENTEGRA FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Dentist giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Dentist contained in this Agreement or in any certificate or other document executed and delivered by Dentist pursuant to this Agreement is or becomes untrue or breached in any material respect or if Dentist fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Dentist if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra or Dentist if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Dentist, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received as consideration by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, received by any party hereunder as consideration, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, received by any party hereunder as consideration, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Dentist pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the shares of Pentegra Common Stock to be delivered to Dentist pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Dentist covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Dentist resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect its own interests in connection with the acquisition of the Pentegra Common Stock. Dentist and its representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Dentist and its representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Dentist is an "accredited investor" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes and acknowledges that it had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is a valuable, special and unique asset of Pentegra's businesses. Dentist agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Dentist, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Dentist shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Dentist reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Dentist is the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Dentist from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. Pentegra recognizes and acknowledges that it had in the past, currently have, and in the future may possibly have, access to certain confidential information of Dentist that is a valuable, special and unique asset of Dentist. Pentegra agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Pentegra, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Pentegra shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Pentegra reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Pentegra is the sole and exclusive owner of such confidential information as a result of the transaction contemplated hereunder or otherwise. In the event of a breach or threatened breach by Pentegra of the provision of this SECTION 13. Dentist shall be entitled to an injunction restraining Pentegra from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Dentist and Pentegra shall be filed in a manner consistent with such intention and Dentist and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Dentist: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Dentist for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Dentist. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF TEXAS AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS AND THE ESCROW LETTER ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Dentist, be relieved from its obligations to Dentist under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Dentist, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoenix, Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. PENTEGRA DENTAL GROUP, INC. By: /s/ James L. Dunn, Jr. ------------------------------------- Its: Senior Vice President ------------------------------------- /s/ Jimmy F. Pinner, D.D.S. ---------------------------------------- Jimmy F. Pinner, D.D.S. INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 [intentionally omitted] 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.44 40 EXHIBIT 2.44 AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG PENTEGRA DENTAL GROUP, INC., OMER K. REED, D.D.S., LTD. and OMER K. REED, D.D.S. TABLE OF CONTENTS PAGE ---- Section 1. TERMS OF THE REORGANIZATION 1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . . 2 1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . 4 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . 9 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . 11 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . 12 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . 13 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . 13 Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . 13 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . 14 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . 14 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . 14 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . 14 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . 14 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . 14 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . 14 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . 14 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . 14 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . 15 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . 15 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . 15 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . . 15 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . 16 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . 17 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . 17 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . 18 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . 19 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . 20 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . 20 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . 21 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . 22 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . 22 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . 22 14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . 23 14.12 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 23 14.13 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.14 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.15 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.16 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), OMER K. REED, D.D.S., LTD., an Arizona professional corporation ("Company") and OMER K. REED, D.D.S., shareholder of Company (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Company operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, the Boards of Directors of the Company and Pentegra have determined that a reorganization between each of them is in the best interests of their respective companies; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Company, the "Target Companies") and simultaneously with the closing of the reorganization contemplated herein, intends to consummate its initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock"); WHEREAS, it is intended for Federal income tax purposes that the reorganization contemplated by this Agreement shall qualify as an reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. . NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE REORGANIZATION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 MERGER. Subject to and upon the terms and conditions contained herein, on the Closing Date, the Company shall be merged with and into Pentegra (or its designated affiliate, in which case, the references herein to Pentegra shall be to such designated affiliate and its shares of common stock) in accordance with this Agreement and the separate corporate existence of the Company shall thereupon cease ("Merger"). Pentegra shall be the surviving corporation in the Merger ("Surviving Corporation") and shall continue to be governed by the laws of the State of Delaware and the separate corporate existence of Pentegra with all rights, privileges, powers, immunities and purposes shall continue unaffected by the Merger. The Merger shall have the effects specified in the Delaware General Corporation Law and the Arizona Business Corporation Law. If all the conditions to the Merger set forth herein shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated in accordance herewith, the parties hereto shall cause to be properly executed and filed on the Closing Date Certificates of Merger for the Company meeting the applicable legal requirements. The Mergers shall become effective on the Closing Date or the filing of such documents, in accordance with applicable law, or at such later time as the parties hereto have agreed upon and designated in such merger filings. 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation until duly amended in accordance with their terms. 1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra immediately prior to the effective date of the Merger shall be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. The persons who are officers of Pentegra immediately prior to the effective date of the Merger shall be the officers of the Surviving Corporation and shall hold their respective offices until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal. 1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and without any action on the part of the holder thereof, all shares of the Company's common stock issued and outstanding on the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired and shall cease to exist, and each holder of a certificate of representing shares of Company common stock shall thereafter cease to have any rights with respect to such shares except the right to receive the consideration set forth on ANNEX I attached hereto (the "Merger Consideration"). Each share of common stock of the Company held in treasury at the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired without payment of any consideration therefor. On the effective date of the Merger, each share of Pentegra Common Stock issued and outstanding shall, by virtue of he Mergers, and without any action on the part of the holder thereof, continue unchanged and remain outstanding as a share of validly issued, fully paid and nonassessable share of Surviving Corporation common stock. 1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger, the Shareholders, as the holders of a certificate or certificates representing shares of Company common stock shall, upon surrender of such certificate or certificates, receive the Merger Consideration, and until the certificate or certificates of Company common stock shall have been surrendered by the Shareholder and replaced by a certificate or certificates representing Pentegra Common Stock (as set forth on ANNEX I), the certificate or certificates of Company common stock shall, for all purposes be deemed to evidence ownership of the number of shares of Pentegra Common Stock determined in accordance with the provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the Shareholders in the Merger shall be deemed for all purposes to have been issued by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at Closing the certificate or certificates representing the Company common stock owned by them, duly endorsed in blank by the Shareholders, or accompanied by duly executed blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the Shareholder's expense, affixed and cancelled. 1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Company and Shareholders shall excecute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Arizona. Company has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Company does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Company a party to any joint venture or partnership. The Shareholders are the sole shareholders of Company and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Company are owned by Company in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Company on any matter, (b) securities of Company convertible into equity interests in Company, or (c) commitments, options, rights or warrants to issue any such equity interests in Company, to issue securities of Company convertible into such equity interests, or to redeem any securities of Company. No shares of capital stock of Company have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Company's stockholders. Company is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Company does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Company has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Company and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Company and Shareholders, enforceable against Company and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Company or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Company or any Shareholder is a party or by which Company or any Shareholder is bound, or violate any material restrictions of any kind to which Company is subject, or result in any lien or encumbrance on any of Company's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Company and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Company or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Company on any of its capital stock since the Balance Sheet Date. No repurchase of any of Company's capital stock has been approved, effected or is pending, or is contemplated by Company. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Company and all amendments thereto have been delivered to Pentegra. The minute books of Company contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Company since its formation. The books of account of Company have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Company have been properly recorded in such books. 2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Company as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Company. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Company or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Company, as lessor or lessee, or any condition or event of which any Shareholder or Company has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Company or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Company and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Company, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Company has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Company, including the names of any entities from whom Company previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Company in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Company has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Company and the offices held by each, (b) the most recent payroll report of Company, showing all current employees of Company and their current levels of compensation, (c) promised increases in compensation of employees of Company that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Company is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Company is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Company has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Company, and Company has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the Business nor any of the Assets is subject to any pending, nor does Company or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Company, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Company and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Company or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Company has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Company ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Company or any Shareholder, or any condition or event of which Company or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Company and Shareholders have no knowledge of any default by any other party to such Contracts. Company and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Company or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Company on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Company since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Company; (o) Repurchased, approved any repurchase or agreed to repurchase any of Company's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Company has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Company has not received any notice that any tax deficiency or delinquency has been or may be asserted against Company. There are no audits relating to taxes of Company pending or in process or, to the knowledge of Company, threatened. Company is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Company. Company has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Company nor any predecessor of Company is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Company has delivered to Pentegra correct and complete copies of Company's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Company during the three calendar year period preceding the date of this Agreement. Company has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) No Shareholder presently intends to dispose of any of the shares of Pentegra Common Stock to be received hereunder nor is a party to any plan, arrangement or agreement for the disposition of such shares. Company and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Shareholders from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Company or Company's shareholders resulting from any action taken by Company or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Company or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Company (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed professional of Company carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Company have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Company, nor any Shareholder nor any licensed professional employee of Company has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Company has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company Plan," and collectively "Company Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Company has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Company Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Company Plans. Company has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Company Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Company, any Shareholder or any licensed professional employee of Company of any Federal, state or local law or regulation. Company and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Company. 2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed professional employee or independent contractor of Company has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Company, any Shareholder and each licensed professional employee of Company. Neither Company, nor any Shareholder, nor any licensed professional employee of Company has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Company, Shareholders and Company's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Company or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Company has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Company, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Company or any organization that has a material contract or arrangement with Company. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Company's services which accounted for more than 10% of revenues of Company in the preceding fiscal year. Company has good relations with all such payors and other material payors of Company and none of such payors has notified Company that it intends to discontinue its relationship with Company or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Company and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the reorganization contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the reorganization contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Company or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Company and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the Business and use the Assets in the ordinary course. Company and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Company and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Company and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Company. Company and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Company and Shareholdes shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Company, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Company, the Business or the Assets as Pentegra or its representatives may request. Company and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Company is a party or relating to the Business or the Assets, and (b) any adverse change in Company's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Company and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Company and Shareholders shall not, and shall use its best efforts to cause Company's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Company or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Company and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Company and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Company or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Company to any employee or other person or entity (including, without limitation, any Company Plan and any liability under employment contracts with Company) allocable to services performed prior to the Closing Date. Company and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Company's employees or similar persons or entities, including, without limitation, any Company Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Company shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Company, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Company, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Company, nor will any repurchase of any of Company's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the reorganization contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Company (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Company and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Company required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Company hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Company and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Company prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Company and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Company and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Company leases any of its premises from any Shareholder or other affiliate of Company or any shareholder of Company, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dentist employees of Company designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Company and Shareholders shall remain liable under any Company Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Company's employees incurred by Company prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Company and shall be treated as Clinic employees for purposes of eligibility and participation in Company Plans. 4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the practice of dentistry is conducted by the Shareholders and the Practice. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Shareholders shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. The Company shall have transferred the Excluded Assets set forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for equity interest in the Practice, and the Company shall have distributed such equity interests in the Practice to the Shareholders. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and have filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS. Pentegra, Shareholders and Company agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Company and Shareholders shall furnish all information concerning Company and Shareholders as may be reasonable requested in connection with any such action. Company and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Company and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Company and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Company and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Company and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Company, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Each Shareholder shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused each shareholder of Company that has an existing employment agreement with Company to have terminated his or her employment agreement with Company and shall have executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Company and Pentegra. 7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Company and its shareholders or affiliates and Company shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Company since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Company and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Company shall have received all documents, duly executed in form satisfactory to Company and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days after requested by Pentegra, Company and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Company authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) executed merger certificate and/or plan as required by applicable state law; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra and the original stock certificates together with blank stock powers representing the outstanding shares of Company common stock; (f) certificates of the Shareholders and a duly authorized officer of Company dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Company and Shareholder contained herein; (ii) as to the performance of and compliance by Company and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Company and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Company certifying as to the incumbency of the directors and officers of Company and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Company; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Company and any state of required foreign qualification of Company establishing that Company is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Company and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Company, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Company; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Company and Shareholders, the following, all of which shall be in a form satisfactory to counsel to Company and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Merger Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Company; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Company; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Company to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Company and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Company or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Company or any Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Company or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Company or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Company or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Company if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Company, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Company pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Company pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Each Shareholder covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Company resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Company and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Company or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Company and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Company and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Company and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Company and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement will qualify as a reorganization within the meaning of Section 368(a) of the Code. The tax returns (and schedules thereto) of Shareholders, Company and Pentegra shall be filed in a manner consistent with such intention and Shareholders and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Company and Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Company or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Company. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Company, be relieved from its obligations to Company under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Company, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Company and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Company or may demand from Company, and Company agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Companys or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. OMER K. REED, D.D.S., P.C. By: /s/ Omer K. Reed ---------------------------------------- Its: -------------------------------------- PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman ---------------------------------------- Its: Senior VP -------------------------------------- /s/ Omer K. Reed, D.D.S. ------------------------------------------- Omer K. Reed, D.D.S. INDEX TO EXHIBITS EXHIBIT DESCRIPTION Annex I Merger Consideration A Target Companies 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 4.16 Excluded Assets and Excluded Liabilities 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.45 41 EXHIBIT 2.45 AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG PENTEGRA DENTAL GROUP, INC., RICHARD REINITZ, D.D.S., P.C. and Richard Reinitz, D.D.S. TABLE OF CONTENTS PAGE Section 1. TERMS OF THE REORGANIZATION 1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . 2 1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . 4 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . 9 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . 11 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . 12 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . 13 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . 13 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 13 Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . 13 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 14 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . 14 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . 14 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . 14 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . 14 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . 14 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . 14 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . 14 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . 14 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . 14 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . 15 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 15 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . 15 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . 15 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . 15 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . 16 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . 17 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . 17 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . 18 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . 19 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 20 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . 20 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . 21 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . 22 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . 22 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . 22 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . 22 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . 22 14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . 23 14.12 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . 23 14.13 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.14 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . 23 14.15 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.16 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), Richard Reinitz, D.D.S., P.C. ("Company") and Richard Reinitz, D.D.S., shareholders of Company (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Company operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, the Boards of Directors of the Company and Pentegra have determined that a reorganization between each of them is in the best interests of their respective companies; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Company, the "Target Companies") and simultaneously with the closing of the reorganization contemplated herein, intends to consummate its initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock"); WHEREAS, it is intended for Federal income tax purposes that the reorganization contemplated by this Agreement shall qualify as an reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. . NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE REORGANIZATION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 MERGER. Subject to and upon the terms and conditions contained herein, on the Closing Date, the Company shall be merged with and into Pentegra (or its designated affiliate, in which case, the references herein to Pentegra shall be to such designated affiliate and its shares of common stock) in accordance with this Agreement and the separate corporate existence of the Company shall thereupon cease ("Merger"). Pentegra shall be the surviving corporation in the Merger ("Surviving Corporation") and shall continue to be governed by the laws of the State of Delaware and the separate corporate existence of Pentegra with all rights, privileges, powers, immunities and purposes shall continue unaffected by the Merger. The Merger shall have the effects specified in the Delaware General Corporation Law and the Business Corporation Law. If all the conditions to the Merger set forth herein shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated in accordance herewith, the parties hereto shall cause to be properly executed and filed on the Closing Date Certificates of Merger for the Company meeting the applicable legal requirements. The Mergers shall become effective on the Closing Date or the filing of such documents, in accordance with applicable law, or at such later time as the parties hereto have agreed upon and designated in such merger filings. 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation until duly amended in accordance with their terms. 1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra immediately prior to the effective date of the Merger shall be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. The persons who are officers of Pentegra immediately prior to the effective date of the Merger shall be the officers of the Surviving Corporation and shall hold their respective offices until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal. 1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and without any action on the part of the holder thereof, all shares of the Company's common stock issued and outstanding on the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired and shall cease to exist, and each holder of a certificate of representing shares of Company common stock shall thereafter cease to have any rights with respect to such shares except the right to receive the consideration set forth on ANNEX I attached hereto (the "Merger Consideration"). Each share of common stock of the Company held in treasury at the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired without payment of any consideration therefor. On the effective date of the Merger, each share of Pentegra Common Stock issued and outstanding shall, by virtue of he Mergers, and without any action on the part of the holder thereof, continue unchanged and remain outstanding as a share of validly issued, fully paid and nonassessable share of Surviving Corporation common stock. 1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger, the Shareholders, as the holders of a certificate or certificates representing shares of Company common stock shall, upon surrender of such certificate or certificates, receive the Merger Consideration, and until the certificate or certificates of Company common stock shall have been surrendered by the Shareholder and replaced by a certificate or certificates representing Pentegra Common Stock (as set forth on ANNEX I), the certificate or certificates of Company common stock shall, for all purposes be deemed to evidence ownership of the number of shares of Pentegra Common Stock determined in accordance with the provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the Shareholders in the Merger shall be deemed for all purposes to have been issued by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at Closing the certificate or certificates representing the Company common stock owned by them, duly endorsed in blank by the Shareholders, or accompanied by duly executed blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the Shareholder's expense, affixed and cancelled. 1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Company and Shareholders shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Texas. Company has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Company does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Company a party to any joint venture or partnership. The Shareholders are the sole shareholders of Company and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Company are owned by Company in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Company on any matter, (b) securities of Company convertible into equity interests in Company, or (c) commitments, options, rights or warrants to issue any such equity interests in Company, to issue securities of Company convertible into such equity interests, or to redeem any securities of Company. No shares of capital stock of Company have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Company's stockholders. Company is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Company does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Company has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Company and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Company and Shareholders, enforceable against Company and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Company or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Company or any Shareholder is a party or by which Company or any Shareholder is bound, or violate any material restrictions of any kind to which Company is subject, or result in any lien or encumbrance on any of Company's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All material building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Company and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Company or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Company on any of its capital stock since the Balance Sheet Date. No repurchase of any of Company's capital stock has been approved, effected or is pending, or is contemplated by Company. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Company and all amendments thereto have been delivered to Pentegra. The minute books of Company contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Company since its formation. The books of account of Company have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Company have been properly recorded in such books. 2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Company as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Company. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Company or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Company, as lessor or lessee, or any condition or event of which any Shareholder or Company has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Company or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Company and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. Pentegra acknowledges that it has acquired the assets "where and as is" relying solely upon Pentegra's own examination. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Company, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Company has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Company, including the names of any entities from whom Company previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Company in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Company has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Company and the offices held by each, (b) the most recent payroll report of Company, showing all current employees of Company and their current levels of compensation, (c) promised increases in compensation of employees of Company that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Company is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Company is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Company has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Company, and Company has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Except as set forth on Exhibit 2.16, neither any Shareholder, Company nor the Business nor any of the Assets is subject to any pending, nor does Company or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Company, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Company and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Company or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Company has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Company ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Company or any Shareholder, or any condition or event of which Company or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Company and Shareholders have no knowledge of any default by any other party to such Contracts. Company and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Company or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Company on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement, other than in course of business; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Company since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Company; (o) Repurchased, approved any repurchase or agreed to repurchase any of Company's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Company has filed all tax returns (including tax reports and other statements) required to have been filed by it or have been properly extended, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Company has not received any notice that any tax deficiency or delinquency has been or may be asserted against Company. There are no audits relating to taxes of Company pending or in process or, to the knowledge of Company, threatened. Company is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Company. Company has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Company nor any predecessor of Company is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Company has delivered to Pentegra correct and complete copies of Company's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Company during the three calendar year period preceding the date of this Agreement. Company has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) No Shareholder presently intends to dispose of any of the shares of Pentegra Common Stock to be received hereunder nor is a party to any plan, arrangement or agreement for the disposition of such shares. Company and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Shareholders from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Company or Company's shareholders resulting from any action taken by Company or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any material liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Company or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Company (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed professional of Company carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Company have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Company, nor any Shareholder nor any licensed professional employee of Company has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Company has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company Plan," and collectively "Company Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. To the best of the Company's knowledge, no act or failure to act by Company has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Company Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Company Plans. Company has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Company Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Company, any Shareholder or any licensed professional employee of Company of any Federal, state or local law or regulation. Company and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Company. 2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed professional employee or independent contractor of Company has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Company, any Shareholder and each licensed professional employee of Company. Neither Company, nor any Shareholder, nor any licensed professional employee of Company has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Company, Shareholders and Company's licensed professional employees have not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Company or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Company has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Company (or their respective spouses, children or affiliates) owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Company or any organization that has a material contract or arrangement with Company. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Company's services which accounted for more than 10% of revenues of Company in the preceding fiscal year. Company has good relations with all such payors and other material payors of Company and none of such payors has notified Company that it intends to discontinue its relationship with Company or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Company and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Pentegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the reorganization contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the reorganization contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Company or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Company and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to both Company and Pentegra. 4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the Business and use the Assets in the ordinary course. Company and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Company and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Company and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Company. Company and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Company and Shareholder shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Company, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Company, the Business or the Assets as Pentegra or its representatives may request. Company and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Company is a party or relating to the Business or the Assets, and (b) any adverse change in Company's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Company and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Company and Shareholders shall not, and shall use its best efforts to cause Company's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Company or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Company and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Company and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Company or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Company to any employee or other person or entity (including, without limitation, any Company Plan and any liability under employment contracts with Company) allocable to services performed prior to the Closing Date. Company and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Company's employees or similar persons or entities, including, without limitation, any Company Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Company shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Company, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Company, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Company, nor will any repurchase of any of Company's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the reorganization contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Company (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Company and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Company required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Company hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Company and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Company prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Company and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Company and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Company leases any of its premises from any Shareholder or other affiliate of Company or any shareholder of Company, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dentist employees of Company employed by the Company as of the Closing Date, with such employment to be effective as of the Closing Date. Notwithstanding the above, Company and Shareholders shall remain liable under any Company Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Company's employees incurred by Company prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Company and shall be treated as Clinic employees for purposes of eligibility and participation in Company Plans. 4.15 INSURANCE. Company shall agree to have and shall assist Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a limited liability company, partnership or other legal entity (the "Practice") for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the practice of dentistry is conducted by the Shareholders and the Practice. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Shareholders shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. The Company shall have transferred the Excluded Assets set forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for equity interest in the Practice, and the Company shall have distributed such equity interests in the Practice to the Shareholders. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice on the Closing Date and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and have filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra and Company agree to complete the Exhibits hereto to be provided by both parties. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS. Pentegra, Shareholders and Company agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Company and Shareholders shall furnish all information concerning Company and Shareholders as may be reasonable requested in connection with any such action. Company and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Company and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Company and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Company and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Company and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Company, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a mutually agreeable Service Agreement (the "Service Agreement"), which may be in the form attached hereto as EXHIBIT 7.7, and otherwise satisfactory to Company and Pentegra, pursuant to which Pentegra will provide management services to the Practice. Each Shareholder shall have executed and delivered a mutually agreeable Guaranty Agreement which may be in the form attached as EXHIBIT 4.10, and otherwise satisfactory to Company and Pentegra, of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused each shareholder of Company that has an existing employment agreement with Company to have terminated his or her employment agreement with Company and shall have executed a mutually acceptable employment agreement ("Employment Agreement") with the Practice, which may be in the form attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Company and Pentegra. 7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Company and its shareholders or affiliates and Company shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Company since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Company and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Company shall have received all documents, duly executed in form satisfactory to Company and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. On or before the Closing Date, Company and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Company authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) executed merger certificate and/or plan as required by applicable state law; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra and the original stock certificates together with blank stock powers representing the outstanding shares of Company common stock; (f) certificates of the Shareholders and a duly authorized officer of Company dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Company and Shareholder contained herein; (ii) as to the performance of and compliance by Company and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Company and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Company certifying as to the incumbency of the directors and officers of Company and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Company; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Company and any state of required foreign qualification of Company establishing that Company is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Company and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Company, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Company; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Company and Shareholders, the following, all of which shall be in a form satisfactory to counsel to Company and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Merger Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Company; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Company; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Company to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Company and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD COMPANY AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. (D) ANY LIABILITY OF PENTEGRA FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEY'S FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Company or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Company or any Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Company or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Company or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Company or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Company if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Company, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received as consideration by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, received by any party hereunder as consideration, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, received by any party hereunder as consideration, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Company pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Company pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Each Shareholder covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Company resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Shareholders are "accredited investor" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is a valuable, special and unique asset of Pentegra's businesses. Company and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Company or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Company and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Company and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Company and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Company and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. Pentegra recognizes and acknowledges that it had in the past, currently have, and in the future may possibly have, access to certain confidential information of Company that is a valuable, special and unique asset of Company. Pentegra agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Pentegra, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Pentegra shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Pentegra reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Pentegra is the sole and exclusive owner of such confidential information as a result of the transaction contemplated hereunder or otherwise. In the event of a breach or threatened breach by Pentegra of the provision of this SECTION 13, Company shall be entitled to an injunction restraining Pentegra from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement will qualify as a reorganization within the meaning of Section 368(a) of the Code. The tax returns (and schedules thereto) of Shareholders, Company and Pentegra shall be filed in a manner consistent with such intention and Shareholders and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Company and Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Company or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Company. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF TEXAS AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS AND THE ESCROW ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Company, be relieved from its obligations to Company under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Company, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Company and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Company or may demand from Company, and Company agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Company or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoenix, Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. Richard Reinitz, D.D.S., P.C. By: /s/ Richard Reinitz, D.D.S. -------------------------------------------------- Its: President -------------------------------------------------- PENTEGRA DENTAL GROUP, INC. By: /s/ James L. Dunn, Jr. -------------------------------------------------- Its: Senior Vice-President -------------------------------------------------- /s/ Richard Reinitz, D.D.S. ------------------------------------------------------ Richard Reinitz, D.D.S. INDEX TO EXHIBITS
EXHIBIT DESCRIPTION Annex I Merger Consideration A Target Companies 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 4.16 Excluded Assets and Excluded Liabilities 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice
EX-2.46 42 EXHIBIT 2.46 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., AND GREG RICHARDS, D.D.S. TABLE OF CONTENTS
Page ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. 2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . 3 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . 3 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . 7 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 7 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . 8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . 8 3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 4. COVENANTS OF DENTIST. 4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 9 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 9 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . 9 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . 10 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 10 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . 10 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . . . . 10 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . 11 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 11 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . 11 Section 6. COVENANTS OF PENTEGRA AND DENTIST 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 12 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 12 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . 12 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 12 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . 13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . 13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 8. DENTIST'S CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . 13 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . . . . . . 16 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 17 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 18 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . 19 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . . . 20 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . 21 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . 21 14.12 NO RULE OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . 21 14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . 21 14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.15 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . 21 14.16 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra") and Greg Richards, D.D.S. ("Dentist"). WITNESSETH: WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires to receive from Dentist, certain assets of Dentist; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Dentist, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. . NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Dentist shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Dentist's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Dentist shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Dentist contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Dentist the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Dentist, including, but not limited to, liabilities arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by Dentist, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Dentist reflected on the books of Dentist at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Dentist, any licensed professional employee or independent contractor of Dentist, (vi) any liability for the payment of any taxes of Dentist, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Dentist. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Dentist shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. Dentist hereby represents and warrants to Pentegra as follows: 2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the State of Texas. Dentist does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Dentist and constitute or will constitute the legal, valid and binding obligations of Dentist in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Dentist is a party or by which Dentist is bound, or violate any material restrictions of any kind to which Dentist is subject, or result in any lien or encumbrance on any of Dentist's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Dentist, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Dentist. 2.5 [INTENTIONALLY DELETED]. 2.6 [INTENTIONALLY DELETED]. 2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Dentist as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Dentist. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Dentist leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Dentist, as lessor or lessee, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Dentist has not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Dentist has no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(B)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Dentist, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Dentist has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Dentist, including the names of any entities from whom Dentist previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Dentist in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Dentist has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the most recent payroll report of Dentist, showing all current employees of Dentist and their current levels of compensation, (b) promised increases in compensation of employees of Dentist that have not yet been effected, (c) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Dentist is a party, copies of which have been delivered to Pentegra, and (d) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Dentist is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Dentist has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Dentist, and Dentist has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the Assets is subject to any pending, nor does Dentist have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Dentist, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Dentist, no basis for any such action exists, nor is there any legal impediment of which Dentist has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Dentist ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Dentist, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default. Dentist has no knowledge of any default by any other party to such Contracts. Dentist has not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Dentist, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Dentist on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (d) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (e) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Dentist since the Balance Sheet Date; (f) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (g) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (h) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (i) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (j) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (k) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; or (l) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Dentist has not received any notice that any tax deficiency or delinquency has been or may be asserted against Dentist. There are no audits relating to taxes of Dentist pending or in process or, to the knowledge of Dentist, threatened. Dentist is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Dentist. Dentist has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Dentist nor any predecessor of Dentist is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Dentist has delivered to Pentegra correct and complete copies of Dentist's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Dentist during the three calendar year period preceding the date of this Agreement. Dentist has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Dentist does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Nothing contained herein shall prohibit Dentist from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Dentist resulting from any action taken by Dentist or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Dentist does not know, or have reasonable grounds to know, of any basis for the assertion against Dentist as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Dentist (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Dentist has not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Dentist nor any licensed professional employee of Dentist has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Dentist has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Dentist has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Dentist Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Dentist Plans. Dentist has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Dentist Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Dentist or any licensed professional employee of Dentist of any Federal, state or local law or regulation. Dentist has not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Dentist. 2.24 THIRD PARTY PAYORS. Dentist and each licensed professional employee or independent contractor of Dentist has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Dentist and each licensed professional employee of Dentist. Neither Dentist nor any licensed professional employee of Dentist has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Dentist and Dentist's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by Dentist or to be furnished by Dentist to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Dentist has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or employee or family member of Dentist, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Dentist or any organization that has a material contract or arrangement with Dentist. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Dentist's services which accounted for more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has good relations with all such payors and other material payors of Dentist and none of such payors has notified Dentist that it intends to discontinue its relationship with Dentist or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Dentist as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Pentegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF DENTIST. Dentist agrees that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Dentist agrees to complete the Exhibits hereto to be provided by him in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the Assets in the ordinary course. Dentist shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Dentist shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Dentist shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Dentist. Dentist shall collect its receivables and pay its trade payables in the ordinary course of business. Dentist shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Dentist, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Dentist, the Business or the Assets as Pentegra or its representatives may request. Dentist shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Dentist is a party or relating to the Business or the Assets, and (b) any adverse change in Dentist's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall use his best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Dentist shall not, and shall use its best efforts to cause Dentist's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to the Dentist, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Dentist or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Dentist will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Dentist shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Dentist or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Dentist to any employee or other person or entity (including, without limitation, any Dentist Plan and any liability under employment contracts with Dentist) allocable to services performed prior to the Closing Date. Dentist acknowledges that the purpose and intent of this covenant is to assure that Pentegra shall have no liability whatsoever at any time after the Closing Date with respect to any of Dentist's employees or similar persons or entities, including, without limitation, any Dentist Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of the Dentist (other than in the ordinary course of business) or other employee or an independent contractor of Dentist, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Dentist, its business, assets or prospects. 4.8 [INTENTIONALLY OMITTED]. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material respect the tax or financial accounting methods or practices followed by Dentist (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Dentist will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Dentist required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Dentist covenants and agrees that all of the creditors with respect to the Business and the Assets will be paid in full by Dentist prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Dentist may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Dentist agrees to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Dentist leases any of its premises from the Dentist or other affiliate of Dentist, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Dentist designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Dentist shall remain liable under any Dentist Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Dentist's employees incurred by Dentist prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and shall be treated as Clinic employees for purposes of eligibility and participation in Dentist Plans. 4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the Dentist and the Practice are to practice dentistry. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Dentist shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and has filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND DENTIST. Pentegra and Dentist agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Dentist shall furnish all information concerning Dentist as may be reasonable requested in connection with any such action. Dentist represents and warrants that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Dentist shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Dentist shall furnish Pentegra will all information concerning itself and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Dentist contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Dentist prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Dentist, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Dentist shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Dentist shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her employment agreement and executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra. 7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Dentist and its affiliates and Dentist shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured on its liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Dentist since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. DENTIST'S CONDITIONS PRECEDENT. The obligations of Dentist hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly executed in form satisfactory to Dentist and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF DENTIST. Within five business days after requested by Pentegra, Dentist shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a bill of sale conveying the Assets to Pentegra; (d) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (e) certificates of Dentist dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Dentist contained herein; (ii) as to the performance of and compliance by Dentist with all covenants contained herein; and (iii) certifying that all conditions precedent of Dentist to the Closing have been satisfied; (f) an opinion of counsel to Dentist opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Dentist, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (g) non-foreign affidavits executed by Dentist; (h) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (i) an executed Registration Rights Agreement between Pentegra and Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (j) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Dentist the following, all of which shall be in a form satisfactory to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Dentist; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Dentist; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Dentist to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Dentist or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Dentist giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Dentist contained in this Agreement or in any certificate or other document executed and delivered by Dentist pursuant to this Agreement is or becomes untrue or breached in any material respect or if Dentist fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Dentist if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra or Dentist if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Dentist, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Dentist pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the shares of Pentegra Common Stock to be delivered to Dentist pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Dentist covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Dentist resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect its own interests in connection with the acquisition of the Pentegra Common Stock. Dentist and its representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Dentist and its representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Dentist is an "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes and acknowledges that it had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Dentist agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Dentist, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Dentist shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Dentist reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Dentist is the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Dentist from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Dentist and Pentegra shall be filed in a manner consistent with such intention and Dentist and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Dentist: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Dentist for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Dentist. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Dentist, be relieved from its obligations to Dentist under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Dentist, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoenix, Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. PENTEGRA DENTAL GROUP, INC. By: /s/ James L. Dunn, Jr. ----------------------------------------- Its: Senior Vice President ----------------------------------------- /s/ Greg Richards, D.D.S. -------------------------------------------- Greg Richards, D.D.S. INDEX TO EXHIBITS
Exhibit Description ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 [intentionally omitted] 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice
EX-2.47 43 EXHIBIT 2.47 AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG PENTEGRA DENTAL GROUP, INC., RICHARD N. SMITH, DMD, P.C., and THE PARADISE TRUST TABLE OF CONTENTS PAGE ---- Section 1. TERMS OF THE REORGANIZATION 1.2 MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 CERTIFICATE OF INCORPORATION; BYLAWS . . . . . . . . . . . . . . . . 2 1.7 SUBSEQUENT ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS 2.1 CORPORATE EXISTENCE; GOOD STANDING . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS . . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 3 2.4 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . 4 2.8 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.18 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS . . . . . . . 9 2.28 PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING . . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.6 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . 11 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE . . . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.18 POWER AND AUTHORITY FOR TRANSACTIONS . . . . . . . . . . . . . . . . 12 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4.20 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . 13 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 13 Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS . . . . . . . . . . . . . . . . . . . . . . . 13 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . 14 7.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . 14 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.4 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . 14 7.5 DUE DILIGENCE REVIEW . . . . . . . . . . . . . . . . . . . . . . . . 14 7.6 APPROVAL BY THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . 14 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . 14 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . 14 7.9 CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . 14 7.10 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.11 DEBT AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . 14 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.13 NO CHANGE IN WORKING CAPITAL . . . . . . . . . . . . . . . . . . . . 15 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . 15 8.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . 15 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.4 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . . . 15 9.2 DELIVERIES OF PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . 16 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . 17 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . 17 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . 18 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . 19 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 20 12.2 INVESTMENTS; COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . 20 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . 21 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . 22 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . 22 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . 22 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . 22 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . 22 14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . 23 14.12 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . 23 14.13 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.14 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . 23 14.15 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.16 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), RICHARD N. SMITH, DMD, P.C., a Oregon corporation ("Company") and THE PARADISE TRUST, shareholder of Company (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Company operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, the Boards of Directors of the Company and Pentegra have determined that a reorganization between each of them is in the best interests of their respective companies; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Company, the "Target Companies") and simultaneously with the closing of the reorganization contemplated herein, intends to consummate its initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock"); WHEREAS, it is intended for Federal income tax purposes that the reorganization contemplated by this Agreement shall qualify as an reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE REORGANIZATION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 MERGER. Subject to and upon the terms and conditions contained herein, on the Closing Date, the Company shall be merged with and into Pentegra (or its designated affiliate, in which case, the references herein to Pentegra shall be to such designated affiliate and its shares of common stock) in accordance with this Agreement and the separate corporate existence of the Company shall thereupon cease ("Merger"). Pentegra shall be the surviving corporation in the Merger ("Surviving Corporation") and shall continue to be governed by the laws of the State of Delaware and the separate corporate existence of Pentegra with all rights, privileges, powers, immunities and purposes shall continue unaffected by the Merger. The Merger shall have the effects specified in the Delaware General Corporation Law and the Oregon Business Corporation Law. If all the conditions to the Merger set forth herein shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated in accordance herewith, the parties hereto shall cause to be properly executed and filed on the Closing Date Certificates of Merger for the Company meeting the applicable legal requirements. The Mergers shall become effective on the Closing Date or the filing of such documents, in accordance with applicable law, or at such later time as the parties hereto have agreed upon and designated in such merger filings. 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation until duly amended in accordance with their terms. 1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra immediately prior to the effective date of the Merger shall be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. The persons who are officers of Pentegra immediately prior to the effective date of the Merger shall be the officers of the Surviving Corporation and shall hold their respective offices until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal. 1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and without any action on the part of the holder thereof, all shares of the Company's common stock issued and outstanding on the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired and shall cease to exist, and each holder of a certificate of representing shares of Company common stock shall thereafter cease to have any rights with respect to such shares except the right to receive the consideration set forth on ANNEX I attached hereto (the "Merger Consideration"). Each share of common stock of the Company held in treasury at the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired without payment of any consideration therefor. On the effective date of the Merger, each share of Pentegra Common Stock issued and outstanding shall, by virtue of the Mergers, and without any action on the part of the holder thereof, continue unchanged and remain outstanding as a share of validly issued, fully paid and nonassessable share of Surviving Corporation common stock. 1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger, the Shareholders, as the holders of a certificate or certificates representing shares of Company common stock shall, upon surrender of such certificate or certificates, receive the Merger Consideration, and until the certificate or certificates of Company common stock shall have been surrendered by the Shareholder and replaced by a certificate or certificates representing Pentegra Common Stock (as set forth on ANNEX I), the certificate or certificates of Company common stock shall, for all purposes be deemed to evidence ownership of the number of shares of Pentegra Common Stock determined in accordance with the provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the Shareholders in the Merger shall be deemed for all purposes to have been issued by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at Closing the certificate or certificates representing the Company common stock owned by them, duly endorsed in blank by the Shareholders, or accompanied by duly executed blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the Shareholder's expense, affixed and cancelled. 1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Company and Shareholders shall excecute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Oregon. Company has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Company does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Company a party to any joint venture or partnership. The Shareholders are the sole shareholders of Company and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Company are owned by Company in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Company on any matter, (b) securities of Company convertible into equity interests in Company, or (c) commitments, options, rights or warrants to issue any such equity interests in Company, to issue securities of Company convertible into such equity interests, or to redeem any securities of Company. No shares of capital stock of Company have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Company's stockholders. Company is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Company does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Company has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Company and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Company and Shareholders, enforceable against Company and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Company or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Company or any Shareholder is a party or by which Company or any Shareholder is bound, or violate any material restrictions of any kind to which Company is subject, or result in any lien or encumbrance on any of Company's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Company and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Company or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Company on any of its capital stock since the Balance Sheet Date. No repurchase of any of Company's capital stock has been approved, effected or is pending, or is contemplated by Company. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Company and all amendments thereto have been delivered to Pentegra. The minute books of Company contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Company since its formation. The books of account of Company have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Company have been properly recorded in such books. 2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Company as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Company. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Company or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Company, as lessor or lessee, or any condition or event of which any Shareholder or Company has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Company or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Company and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Company, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Company has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Company, including the names of any entities from whom Company previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Company in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Company has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Company and the offices held by each, (b) the most recent payroll report of Company, showing all current employees of Company and their current levels of compensation, (c) promised increases in compensation of employees of Company that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Company is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Company is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Company has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Company, and Company has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the Business nor any of the Assets is subject to any pending, nor does Company or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Company, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Company and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Company or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Company has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Company ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Company or any Shareholder, or any condition or event of which Company or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Company and Shareholders have no knowledge of any default by any other party to such Contracts. Company and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Company or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Company on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Company since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Company; (o) Repurchased, approved any repurchase or agreed to repurchase any of Company's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 17 TAXES. (a) Company has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Company has not received any notice that any tax deficiency or delinquency has been or may be asserted against Company. There are no audits relating to taxes of Company pending or in process or, to the knowledge of Company, threatened. Company is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Company. Company has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Company nor any predecessor of Company is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Company has delivered to Pentegra correct and complete copies of Company's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Company during the three calendar year period preceding the date of this Agreement. Company has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) No Shareholder presently intends to dispose of any of the shares of Pentegra Common Stock to be received hereunder nor is a party to any plan, arrangement or agreement for the disposition of such shares. Company and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Shareholders from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Company or Company's shareholders resulting from any action taken by Company or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Company or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Company (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed professional of Company carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Company have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Company, nor any Shareholder nor any licensed professional employee of Company has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Company has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company Plan," and collectively "Company Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Company has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Company Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Company Plans. Company has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Company Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Company, any Shareholder or any licensed professional employee of Company of any Federal, state or local law or regulation. Company and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Company. 2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed professional employee or independent contractor of Company has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Company, any Shareholder and each licensed professional employee of Company. Neither Company, nor any Shareholder, nor any licensed professional employee of Company has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Company, Shareholders and Company's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Company or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Company has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Company, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Company or any organization that has a material contract or arrangement with Company. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Company's services which accounted for more than 10% of revenues of Company in the preceding fiscal year. Company has good relations with all such payors and other material payors of Company and none of such payors has notified Company that it intends to discontinue its relationship with Company or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Company and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the reorganization contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the reorganization contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Company or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Company and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the Business and use the Assets in the ordinary course. Company and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Company and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Company and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Company. Company and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Company and Shareholdes shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Company, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Company, the Business or the Assets as Pentegra or its representatives may request. Company and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Company is a party or relating to the Business or the Assets, and (b) any adverse change in Company's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Company and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Company and Shareholders shall not, and shall use its best efforts to cause Company's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Company or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Company and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Company and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Company or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Company to any employee or other person or entity (including, without limitation, any Company Plan and any liability under employment contracts with Company) allocable to services performed prior to the Closing Date. Company and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Company's employees or similar persons or entities, including, without limitation, any Company Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Company shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Company, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Company, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Company, nor will any repurchase of any of Company's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the reorganization contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Company (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Company and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Company required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Company hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Company and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Company prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Company and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Company and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Company leases any of its premises from any Shareholder or other affiliate of Company or any shareholder of Company, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dentist employees of Company designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Company and Shareholders shall remain liable under any Company Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Company's employees incurred by Company prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Company and shall be treated as Clinic employees for purposes of eligibility and participation in Company Plans. 4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the practice of dentistry is conducted by the Shareholders and the Practice. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Shareholders shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. The Company shall have transferred the Excluded Assets set forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for equity interest in the Practice, and the Company shall have distributed such equity interests in the Practice to the Shareholders. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and have filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS. Pentegra, Shareholders and Company agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Company and Shareholders shall furnish all information concerning Company and Shareholders as may be reasonable requested in connection with any such action. Company and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Company and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Company and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Company and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Company and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Company, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Each Shareholder shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused each shareholder of Company that has an existing employment agreement with Company to have terminated his or her employment agreement with Company and shall have executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Company and Pentegra. 7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Company and its shareholders or affiliates and Company shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Company since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Company and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Company shall have received all documents, duly executed in form satisfactory to Company and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days after requested by Pentegra, Company and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Company authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) executed merger certificate and/or plan as required by applicable state law; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra and the original stock certificates together with blank stock powers representing the outstanding shares of Company common stock; (f) certificates of the Shareholders and a duly authorized officer of Company dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Company and Shareholder contained herein; (ii) as to the performance of and compliance by Company and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Company and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Company certifying as to the incumbency of the directors and officers of Company and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Company; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Company and any state of required foreign qualification of Company establishing that Company is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Company and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Company, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Company; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Company and Shareholders, the following, all of which shall be in a form satisfactory to counsel to Company and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Merger Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Company; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Company; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Company to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Company and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Company or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Company or any Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Company or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Company or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Company or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Company if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Company, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Company pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Company pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Each Shareholder covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Company resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Company and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Company or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Company and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Company and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Company and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Company and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement will qualify as a reorganization within the meaning of Section 368(a) of the Code. The tax returns (and schedules thereto) of Shareholders, Company and Pentegra shall be filed in a manner consistent with such intention and Shareholders and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Company and Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Company or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Company. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Company, be relieved from its obligations to Company under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Company, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Company and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Company or may demand from Company, and Company agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Companys or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. RICHARD N. SMITH, DMD, P.C. By: /s/ Richard N. Smith, DMD ---------------------------------- Richard N. Smith, DMD, Co-Trustee By: /s/ Mary E. Smith ---------------------------------- Mary E. Smith, Co-Trustee PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman ---------------------------------- Its: Senior Vice President ---------------------------------- THE PARADISE TRUST /s/ Richard N. Smith, DMD ------------------------------------- Richard N. Smith, DMD , Co-Trustee /s/ Mary E. Smith ------------------------------------- Mary E. Smith, Co-Trustee /s/ Richard N. Smith, DMD ------------------------------------- Richard N. Smith, DMD INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Merger Consideration A Target Companies 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 4.16 Excluded Assets and Excluded Liabilities 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.48 44 EXHIBIT 2.48 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., and JOHN N. STELLPFLUG, D.D.S. TABLE OF CONTENTS
Page ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. 2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . 3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . . 3 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . . 3 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . . 7 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . . 8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . . 8 3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 4. COVENANTS OF DENTIST. 4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 9 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . . 9 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . . 10 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 10 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . . 10 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . . 11 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 11 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 11 Section 6. COVENANTS OF PENTEGRA AND DENTIST 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 12 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . . 12 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . 12 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . . 13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . 13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 8. DENTIST'S CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 13 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . . . . . . . 16 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . 17 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . . 19 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . 21 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . 21 14.12 NO RULE OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.15 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.16 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra") and JOHN N. STELLPFLUG, D.D.S. ("Dentist"). WITNESSETH: WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires to receive from Dentist, certain assets of Dentist; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Dentist, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Dentist shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Dentist's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Dentist shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Dentist contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Dentist the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Dentist, including, but not limited to, liabilities arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by Dentist, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Dentist reflected on the books of Dentist at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Dentist, any licensed professional employee or independent contractor of Dentist, (vi) any liability for the payment of any taxes of Dentist, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Dentist. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Dentist shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. Dentist hereby represents and warrants to Pentegra as follows: 2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the State of Wisconsin. Dentist does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Dentist and constitute or will constitute the legal, valid and binding obligations of Dentist in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Dentist is a party or by which Dentist is bound, or violate any material restrictions of any kind to which Dentist is subject, or result in any lien or encumbrance on any of Dentist's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Dentist, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Dentist. 2.5 [INTENTIONALLY DELETED]. 2.6 [INTENTIONALLY DELETED]. 2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Dentist as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Dentist. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Dentist leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Dentist, as lessor or lessee, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Dentist has not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Dentist has no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Dentist, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Dentist has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Dentist, including the names of any entities from whom Dentist previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Dentist in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Dentist has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the most recent payroll report of Dentist, showing all current employees of Dentist and their current levels of compensation, (b) promised increases in compensation of employees of Dentist that have not yet been effected, (c) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Dentist is a party, copies of which have been delivered to Pentegra, and (d) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Dentist is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Dentist has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Dentist, and Dentist has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the Assets is subject to any pending, nor does Dentist have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Dentist, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Dentist, no basis for any such action exists, nor is there any legal impediment of which Dentist has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Dentist ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Dentist, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default. Dentist has no knowledge of any default by any other party to such Contracts. Dentist has not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Dentist, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Dentist on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (d) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (e) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Dentist since the Balance Sheet Date; (f) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (g) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (h) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (i) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (j) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (k) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; or (l) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Dentist has not received any notice that any tax deficiency or delinquency has been or may be asserted against Dentist. There are no audits relating to taxes of Dentist pending or in process or, to the knowledge of Dentist, threatened. Dentist is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Dentist. Dentist has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Dentist nor any predecessor of Dentist is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Dentist has delivered to Pentegra correct and complete copies of Dentist's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Dentist during the three calendar year period preceding the date of this Agreement. Dentist has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Dentist does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Nothing contained herein shall prohibit Dentist from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Dentist resulting from any action taken by Dentist or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Dentist does not know, or have reasonable grounds to know, of any basis for the assertion against Dentist as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Dentist (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Dentist has not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Dentist nor any licensed professional employee of Dentist has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Dentist has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Dentist has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Dentist Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Dentist Plans. Dentist has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Dentist Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Dentist or any licensed professional employee of Dentist of any Federal, state or local law or regulation. Dentist has not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Dentist. 2.24 THIRD PARTY PAYORS. Dentist and each licensed professional employee or independent contractor of Dentist has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Dentist and each licensed professional employee of Dentist. Neither Dentist nor any licensed professional employee of Dentist has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Dentist and Dentist's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by Dentist or to be furnished by Dentist to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Dentist has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or employee or family member of Dentist, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Dentist or any organization that has a material contract or arrangement with Dentist. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Dentist's services which accounted for more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has good relations with all such payors and other material payors of Dentist and none of such payors has notified Dentist that it intends to discontinue its relationship with Dentist or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Dentist as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF DENTIST. Dentist agrees that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Dentist agrees to complete the Exhibits hereto to be provided by him in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the Assets in the ordinary course. Dentist shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Dentist shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Dentist shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Dentist. Dentist shall collect its receivables and pay its trade payables in the ordinary course of business. Dentist shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Dentist, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Dentist, the Business or the Assets as Pentegra or its representatives may request. Dentist shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Dentist is a party or relating to the Business or the Assets, and (b) any adverse change in Dentist's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall use his best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Dentist shall not, and shall use its best efforts to cause Dentist's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to the Dentist, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Dentist or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Dentist will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Dentist shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Dentist or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Dentist to any employee or other person or entity (including, without limitation, any Dentist Plan and any liability under employment contracts with Dentist) allocable to services performed prior to the Closing Date. Dentist acknowledges that the purpose and intent of this covenant is to assure that Pentegra shall have no liability whatsoever at any time after the Closing Date with respect to any of Dentist's employees or similar persons or entities, including, without limitation, any Dentist Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of the Dentist (other than in the ordinary course of business) or other employee or an independent contractor of Dentist, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Dentist, its business, assets or prospects. 4.8 [INTENTIONALLY OMITTED]. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material respect the tax or financial accounting methods or practices followed by Dentist (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Dentist will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Dentist required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Dentist covenants and agrees that all of the creditors with respect to the Business and the Assets will be paid in full by Dentist prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Dentist may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Dentist agrees to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Dentist leases any of its premises from the Dentist or other affiliate of Dentist, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Dentist designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Dentist shall remain liable under any Dentist Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Dentist's employees incurred by Dentist prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and shall be treated as Clinic employees for purposes of eligibility and participation in Dentist Plans. 4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existence and in good standing under the laws of the State in which the Dentist and the Practice are to practice dentistry. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Dentist shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of thePractice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and has filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND DENTIST. Pentegra and Dentist agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Dentist shall furnish all information concerning Dentist as may be reasonably requested in connection with any such action. Dentist represents and warrants that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Dentist shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Dentist shall furnish Pentegra will all information concerning itself and such other matters as may be reasonably requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Dentist contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Dentist prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Dentist, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Dentist shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Dentist shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her employment agreement and executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra. 7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Dentist and its affiliates and Dentist shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured on its liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Dentist since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. DENTIST'S CONDITIONS PRECEDENT. The obligations of Dentist hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly executed in form satisfactory to Dentist and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF DENTIST. Within five business days after requested by Pentegra, Dentist shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a bill of sale conveying the Assets to Pentegra; (d) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (e) certificates of Dentist dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Dentist contained herein; (ii) as to the performance of and compliance by Dentist with all covenants contained herein; and (iii) certifying that all conditions precedent of Dentist to the Closing have been satisfied; (f) an opinion of counsel to Dentist opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Dentist, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (g) non-foreign affidavits executed by Dentist; (h) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (i) an executed Registration Rights Agreement between Pentegra and Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (j) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Dentist the following, all of which shall be in a form satisfactory to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Dentist; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Dentist; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Dentist to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Dentist or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Dentist giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Dentist contained in this Agreement or in any certificate or other document executed and delivered by Dentist pursuant to this Agreement is or becomes untrue or breached in any material respect or if Dentist fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Dentist if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra or Dentist if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Dentist, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. Notwithstanding the foregoing, Dentist shall be permitted to transfer the shares of Pentegra Common Stock received by him hereunder to a member of his immediate family provided that such family member agrees to be bound by the limitations set forth in this SECTION 12.1. The certificates evidencing the Pentegra Common Stock delivered to Dentist pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the shares of Pentegra Common Stock to be delivered to Dentist pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Dentist covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Dentist resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect its own interests in connection with the acquisition of the Pentegra Common Stock. Dentist and its representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Dentist and its representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Dentist is an "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes and acknowledges that it had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Dentist agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Dentist, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Dentist shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Dentist reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Dentist is the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Dentist from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Dentist and Pentegra shall be filed in a manner consistent with such intention and Dentist and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Dentist: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Dentist for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Dentist. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Dentist, be relieved from its obligations to Dentist under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Dentist, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman ----------------------------------------- Its: Senior VP ----------------------------------------- /s/ John N. Stellpflug, D.D.S. -------------------------------------------- John N. Stellpflug, D.D.S. INDEX TO EXHIBITS Exhibit Description - ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 [intentionally omitted] 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.49 45 EXHIBIT 2.49 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., AND JACK STEPHENS, D.D.S. TABLE OF CONTENTS Page ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . .1 1.3 EXCLUDED ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . .2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .2 Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. 2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . .2 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . 3 2.4 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . .3 2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . .3 2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . .3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . .3 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . .3 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . .3 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . .4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . .4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . .5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . .6 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . .6 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . .6 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . .6 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . .7 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . .7 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .7 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . .8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . .8 3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . .8 3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . .8 3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . .8 Section 4. COVENANTS OF DENTIST. 4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . .9 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . 9 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . 9 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . .10 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . .10 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . .10 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . .10 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . .10 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . .10 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . . . . .10 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . .11 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . .11 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . .11 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . .11 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . .11 Section 6. COVENANTS OF PENTEGRA AND DENTIST 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . .12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . .12 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . .12 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . .12 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . .12 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . .12 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . .13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . .13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . .13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . .13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . .13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . .13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . .13 Section 8. DENTIST'S CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . .13 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . .13 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . .13 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . .14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . . . . .14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . .15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . .15 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . .16 10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . . . . .16 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . .17 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . .18 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . .19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . .19 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . .20 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . .20 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . .20 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . .21 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . .21 14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . .21 14.12 NO RULE OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . .21 14.13 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . .21 14.14 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.15 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . .21 14.16 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 14.17 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra") and Jack Stephens, D.D.S. ("Dentist"). WITNESSETH: WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires to receive from Dentist, certain assets of Dentist; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Dentist, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Dentist shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Dentist's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Dentist shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Dentist contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Dentist the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Dentist, including, but not limited to, liabilities arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by Dentist, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Dentist reflected on the books of Dentist at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Dentist, any licensed professional employee or independent contractor of Dentist, (vi) any liability for the payment of any taxes of Dentist, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Dentist. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Dentist shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. Dentist hereby represents and warrants to Pentegra as follows: 2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the State of Texas. Dentist does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Dentist and constitute or will constitute the legal, valid and binding obligations of Dentist in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Dentist is a party or by which Dentist is bound, or violate any material restrictions of any kind to which Dentist is subject, or result in any lien or encumbrance on any of Dentist's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Dentist, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Dentist. 2.5 [INTENTIONALLY DELETED]. 2.6 [INTENTIONALLY DELETED]. 2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Dentist as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Dentist. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Dentist leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Dentist, as lessor or lessee, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Dentist has not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Dentist has no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Dentist, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Dentist has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Dentist, including the names of any entities from whom Dentist previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Dentist in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Dentist has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the most recent payroll report of Dentist, showing all current employees of Dentist and their current levels of compensation, (b) promised increases in compensation of employees of Dentist that have not yet been effected, (c) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Dentist is a party, copies of which have been delivered to Pentegra, and (d) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Dentist is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Dentist has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Dentist, and Dentist has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the Assets is subject to any pending, nor does Dentist have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Dentist, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Dentist, no basis for any such action exists, nor is there any legal impediment of which Dentist has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Dentist ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Dentist, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default. Dentist has no knowledge of any default by any other party to such Contracts. Dentist has not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Dentist, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Dentist on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (d) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (e) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Dentist since the Balance Sheet Date; (f) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (g) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (h) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (i) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (j) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (k) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; or (l) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Dentist has not received any notice that any tax deficiency or delinquency has been or may be asserted against Dentist. There are no audits relating to taxes of Dentist pending or in process or, to the knowledge of Dentist, threatened. Dentist is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Dentist. Dentist has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Dentist nor any predecessor of Dentist is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Dentist has delivered to Pentegra correct and complete copies of Dentist's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Dentist during the three calendar year period preceding the date of this Agreement. Dentist has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Dentist does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Nothing contained herein shall prohibit Dentist from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Dentist resulting from any action taken by Dentist or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Dentist does not know, or have reasonable grounds to know, of any basis for the assertion against Dentist as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Dentist (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Dentist has not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Dentist nor any licensed professional employee of Dentist has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Dentist has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Dentist has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Dentist Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Dentist Plans. Dentist has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Dentist Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Dentist or any licensed professional employee of Dentist of any Federal, state or local law or regulation. Dentist has not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Dentist. 2.24 THIRD PARTY PAYORS. Dentist and each licensed professional employee or independent contractor of Dentist has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Dentist and each licensed professional employee of Dentist. Neither Dentist nor any licensed professional employee of Dentist has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Dentist and Dentist's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by Dentist or to be furnished by Dentist to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Dentist has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or employee or family member of Dentist, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Dentist or any organization that has a material contract or arrangement with Dentist. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Dentist's services which accounted for more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has good relations with all such payors and other material payors of Dentist and none of such payors has notified Dentist that it intends to discontinue its relationship with Dentist or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Dentist as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Pentegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF DENTIST. Dentist agrees that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Dentist agrees to complete the Exhibits hereto to be provided by him in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the Assets in the ordinary course. Dentist shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Dentist shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Dentist shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Dentist. Dentist shall collect its receivables and pay its trade payables in the ordinary course of business. Dentist shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Dentist, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Dentist, the Business or the Assets as Pentegra or its representatives may request. Dentist shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Dentist is a party or relating to the Business or the Assets, and (b) any adverse change in Dentist's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall use his best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Dentist shall not, and shall use its best efforts to cause Dentist's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to the Dentist, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Dentist or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Dentist will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Dentist shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Dentist or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Dentist to any employee or other person or entity (including, without limitation, any Dentist Plan and any liability under employment contracts with Dentist) allocable to services performed prior to the Closing Date. Dentist acknowledges that the purpose and intent of this covenant is to assure that Pentegra shall have no liability whatsoever at any time after the Closing Date with respect to any of Dentist's employees or similar persons or entities, including, without limitation, any Dentist Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of the Dentist (other than in the ordinary course of business) or other employee or an independent contractor of Dentist, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Dentist, its business, assets or prospects. 4.8 [INTENTIONALLY OMITTED]. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material respect the tax or financial accounting methods or practices followed by Dentist (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Dentist will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Dentist required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Dentist covenants and agrees that all of the creditors with respect to the Business and the Assets will be paid in full by Dentist prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Dentist may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Dentist agrees to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Dentist leases any of its premises from the Dentist or other affiliate of Dentist, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Dentist designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Dentist shall remain liable under any Dentist Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Dentist's employees incurred by Dentist prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and shall be treated as Clinic employees for purposes of eligibility and participation in Dentist Plans. 4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the Dentist and the Practice are to practice dentistry. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Dentist shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and has filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND DENTIST. Pentegra and Dentist agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Dentist shall furnish all information concerning Dentist as may be reasonable requested in connection with any such action. Dentist represents and warrants that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Dentist shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Dentist shall furnish Pentegra will all information concerning itself and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Dentist contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Dentist prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Dentist, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Dentist shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Dentist shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her employment agreement and executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra. 7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Dentist and its affiliates and Dentist shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured on its liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Dentist since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. DENTIST'S CONDITIONS PRECEDENT. The obligations of Dentist hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly executed in form satisfactory to Dentist and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF DENTIST. Within five business days after requested by Pentegra, Dentist shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a bill of sale conveying the Assets to Pentegra; (d) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (e) certificates of Dentist dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Dentist contained herein; (ii) as to the performance of and compliance by Dentist with all covenants contained herein; and (iii) certifying that all conditions precedent of Dentist to the Closing have been satisfied; (f) an opinion of counsel to Dentist opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Dentist, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (g) non-foreign affidavits executed by Dentist; (h) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (i) an executed Registration Rights Agreement between Pentegra and Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (j) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Dentist the following, all of which shall be in a form satisfactory to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Dentist; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Dentist; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Dentist to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Dentist or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Dentist giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Dentist contained in this Agreement or in any certificate or other document executed and delivered by Dentist pursuant to this Agreement is or becomes untrue or breached in any material respect or if Dentist fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Dentist if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra or Dentist if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Dentist, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Dentist pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the shares of Pentegra Common Stock to be delivered to Dentist pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Dentist covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Dentist resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect its own interests in connection with the acquisition of the Pentegra Common Stock. Dentist and its representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Dentist and its representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Dentist is an "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes and acknowledges that it had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Dentist agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Dentist, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Dentist shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Dentist reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Dentist is the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Dentist from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Dentist and Pentegra shall be filed in a manner consistent with such intention and Dentist and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Dentist: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Dentist for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Dentist. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Dentist, be relieved from its obligations to Dentist under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Dentist, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoenix, Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. PENTEGRA DENTAL GROUP, INC. By: /s/ James L. Dunn, Jr. ---------------------------------------- Its: Senior Vice President ---------------------------------------- /s/ Jack Stephens, D.D.S. -------------------------------------------- Jack Stephens, D.D.S. INDEX TO EXHIBITS Exhibit Description - ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 [intentionally omitted] 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.50 46 EXHIBIT 2.50 AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG PENTEGRA DENTAL GROUP, INC., Y. PAUL SUZUKI, D.D.S., P.S. and PAUL SUZUKI, D.D.S. TABLE OF CONTENTS PAGE Section 1. TERMS OF THE REORGANIZATION 1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . 2 1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . 4 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . 5 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . 6 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . 9 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . 11 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . 12 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . 12 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . 13 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . 13 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . 13 Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . 13 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . 14 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . 14 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . 14 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . 14 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . 14 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . 14 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . 14 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . 14 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . 14 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . 14 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . 15 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . 15 Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . 15 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . 15 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . 15 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . 15 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . 15 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . 16 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . 17 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . 17 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . 18 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . 19 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . 20 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . 20 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . 21 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . 22 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . 22 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . 22 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . 22 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . 22 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . 23 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . 23 14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . 23 14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . 23 14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . 23 14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . 24 AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), Y. PAUL SUZUKI, D.D.S., P.S., a Washington professional corporation ("Company") and PAUL SUZUKI, D.D.S., shareholder of Company (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Company operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, the Boards of Directors of the Company and Pentegra have determined that a reorganization between each of them is in the best interests of their respective companies; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Company, the "Target Companies") and simultaneously with the closing of the reorganization contemplated herein, intends to consummate its initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock"); WHEREAS, it is intended for Federal income tax purposes that the reorganization contemplated by this Agreement shall qualify as an reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE REORGANIZATION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 MERGER. Subject to and upon the terms and conditions contained herein, on the Closing Date, the Company shall be merged with and into Pentegra (or its designated affiliate, in which case, the references herein to Pentegra shall be to such designated affiliate and its shares of common stock) in accordance with this Agreement and the separate corporate existence of the Company shall thereupon cease ("Merger"). Pentegra shall be the surviving corporation in the Merger ("Surviving Corporation") and shall continue to be governed by the laws of the State of Delaware and the separate corporate existence of Pentegra with all rights, privileges, powers, immunities and purposes shall continue unaffected by the Merger. The Merger shall have the effects specified in the Delaware General Corporation Law and the Washington Business Corporation Law. If all the conditions to the Merger set forth herein shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated in accordance herewith, the parties hereto shall cause to be properly executed and filed on the Closing Date Certificates of Merger for the Company meeting the applicable legal requirements. The Mergers shall become effective on the Closing Date or the filing of such documents, in accordance with applicable law, or at such later time as the parties hereto have agreed upon and designated in such merger filings. 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation until duly amended in accordance with their terms. 1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra immediately prior to the effective date of the Merger shall be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. The persons who are officers of Pentegra immediately prior to the effective date of the Merger shall be the officers of the Surviving Corporation and shall hold their respective offices until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal. 1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and without any action on the part of the holder thereof, all shares of the Company's common stock issued and outstanding on the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired and shall cease to exist, and each holder of a certificate of representing shares of Company common stock shall thereafter cease to have any rights with respect to such shares except the right to receive the consideration set forth on ANNEX I attached hereto (the "Merger Consideration"). Each share of common stock of the Company held in treasury at the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired without payment of any consideration therefor. On the effective date of the Merger, each share of Pentegra Common Stock issued and outstanding shall, by virtue of he Mergers, and without any action on the part of the holder thereof, continue unchanged and remain outstanding as a share of validly issued, fully paid and nonassessable share of Surviving Corporation common stock. 1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger, the Shareholders, as the holders of a certificate or certificates representing shares of Company common stock shall, upon surrender of such certificate or certificates, receive the Merger Consideration, and until the certificate or certificates of Company common stock shall have been surrendered by the Shareholder and replaced by a certificate or certificates representing Pentegra Common Stock (as set forth on ANNEX I), the certificate or certificates of Company common stock shall, for all purposes be deemed to evidence ownership of the number of shares of Pentegra Common Stock determined in accordance with the provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the Shareholders in the Merger shall be deemed for all purposes to have been issued by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at Closing the certificate or certificates representing the Company common stock owned by them, duly endorsed in blank by the Shareholders, or accompanied by duly executed blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the Shareholder's expense, affixed and cancelled. 1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Company and Shareholders shall excecute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Washington. Company has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Company does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Company a party to any joint venture or partnership. The Shareholders are the sole shareholders of Company and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Company are owned by Company in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Company on any matter, (b) securities of Company convertible into equity interests in Company, or (c) commitments, options, rights or warrants to issue any such equity interests in Company, to issue securities of Company convertible into such equity interests, or to redeem any securities of Company. No shares of capital stock of Company have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Company's stockholders. Company is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Company does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Company has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Company and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Company and Shareholders, enforceable against Company and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Company or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Company or any Shareholder is a party or by which Company or any Shareholder is bound, or violate any material restrictions of any kind to which Company is subject, or result in any lien or encumbrance on any of Company's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Company and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Company or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Company on any of its capital stock since the Balance Sheet Date. No repurchase of any of Company's capital stock has been approved, effected or is pending, or is contemplated by Company. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Company and all amendments thereto have been delivered to Pentegra. The minute books of Company contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Company since its formation. The books of account of Company have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Company have been properly recorded in such books. 2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Company as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Company. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Company or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Company, as lessor or lessee, or any condition or event of which any Shareholder or Company has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Company or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Company and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Company, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Company has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Company, including the names of any entities from whom Company previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Company in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Company has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Company and the offices held by each, (b) the most recent payroll report of Company, showing all current employees of Company and their current levels of compensation, (c) promised increases in compensation of employees of Company that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Company is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Company is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Company has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Company, and Company has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the Business nor any of the Assets is subject to any pending, nor does Company or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Company, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Company and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Company or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Company has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Company ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Company or any Shareholder, or any condition or event of which Company or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Company and Shareholders have no knowledge of any default by any other party to such Contracts. Company and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Company or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Company on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Company since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Company; (o) Repurchased, approved any repurchase or agreed to repurchase any of Company's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Company has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Company has not received any notice that any tax deficiency or delinquency has been or may be asserted against Company. There are no audits relating to taxes of Company pending or in process or, to the knowledge of Company, threatened. Company is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Company. Company has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Company nor any predecessor of Company is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Company has delivered to Pentegra correct and complete copies of Company's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Company during the three calendar year period preceding the date of this Agreement. Company has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) No Shareholder presently intends to dispose of any of the shares of Pentegra Common Stock to be received hereunder nor is a party to any plan, arrangement or agreement for the disposition of such shares. Company and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Shareholders from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Company or Company's shareholders resulting from any action taken by Company or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Company or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Company (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed professional of Company carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Company have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Company, nor any Shareholder nor any licensed professional employee of Company has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Company has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company Plan," and collectively "Company Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Company has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Company Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Company Plans. Company has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Company Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Company, any Shareholder or any licensed professional employee of Company of any Federal, state or local law or regulation. Company and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Company. 2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed professional employee or independent contractor of Company has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Company, any Shareholder and each licensed professional employee of Company. Neither Company, nor any Shareholder, nor any licensed professional employee of Company has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Company, Shareholders and Company's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Company or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Company has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Company, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Company or any organization that has a material contract or arrangement with Company. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Company's services which accounted for more than 10% of revenues of Company in the preceding fiscal year. Company has good relations with all such payors and other material payors of Company and none of such payors has notified Company that it intends to discontinue its relationship with Company or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Company and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the reorganization contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the reorganization contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Company or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Company and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the Business and use the Assets in the ordinary course. Company and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Company and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Company and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Company. Company and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Company and Shareholders shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Company, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Company, the Business or the Assets as Pentegra or its representatives may request. Company and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Company is a party or relating to the Business or the Assets, and (b) any adverse change in Company's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Company and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Company and Shareholders shall not, and shall use its best efforts to cause Company's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Company or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Company and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Company and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Company or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Company to any employee or other person or entity (including, without limitation, any Company Plan and any liability under employment contracts with Company) allocable to services performed prior to the Closing Date. Company and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Company's employees or similar persons or entities, including, without limitation, any Company Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Company shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Company, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Company, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Company, nor will any repurchase of any of Company's capital stock be approved or effected. The Company and Shareholder shall cause the amendment of the Articles of Incorporation of the Company to change the purpose of the corporation from the practice of dentistry to general corporate purposes and execute all necessary documentation to evidence such amendment in order to effectuate the reorganization contemplated hereby. 4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the reorganization contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Company (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Company and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Company required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Company hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Company and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Company prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Company and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Company and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Company leases any of its premises from any Shareholder or other affiliate of Company or any shareholder of Company, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dentist employees of Company designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Company and Shareholders shall remain liable under any Company Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Company's employees incurred by Company prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Company and shall be treated as Clinic employees for purposes of eligibility and participation in Company Plans. 4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the practice of dentistry is conducted by the Shareholders and the Practice. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Shareholders shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. The Company shall have transferred the Excluded Assets set forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for equity interest in the Practice, and the Company shall have distributed such equity interests in the Practice to the Shareholders. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and have filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS. Pentegra, Shareholders and Company agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Company and Shareholders shall furnish all information concerning Company and Shareholders as may be reasonable requested in connection with any such action. Company and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Company and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Company and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Company and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Company and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Company, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Each Shareholder shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused each shareholder of Company that has an existing employment agreement with Company to have terminated his or her employment agreement with Company and shall have executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Company and Pentegra. 7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Company and its shareholders or affiliates and Company shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Company since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Company and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Company shall have received all documents, duly executed in form satisfactory to Company and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days after requested by Pentegra, Company and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Company authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) executed merger certificate and/or plan as required by applicable state law; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra and the original stock certificates together with blank stock powers representing the outstanding shares of Company common stock; (f) certificates of the Shareholders and a duly authorized officer of Company dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Company and Shareholder contained herein; (ii) as to the performance of and compliance by Company and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Company and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Company certifying as to the incumbency of the directors and officers of Company and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Company; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Company and any state of required foreign qualification of Company establishing that Company is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Company and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Company, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Company; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Company and Shareholders, the following, all of which shall be in a form satisfactory to counsel to Company and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Merger Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Company; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Company; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Company to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Company and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Company or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Company or any Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Company or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Company or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Company or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Company if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Company, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Company pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Company pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Each Shareholder covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Company resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Company and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Company or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Company and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Company and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Company and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Company and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement will qualify as a reorganization within the meaning of Section 368(a) of the Code. The tax returns (and schedules thereto) of Shareholders, Company and Pentegra shall be filed in a manner consistent with such intention and Shareholders and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Company and Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Company or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Company. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Company, be relieved from its obligations to Company under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Company, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Company and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Company or may demand from Company, and Company agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Companys or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. Y. PAUL SUZUKI, D.D.S., P.S. By: /s/ Y. Paul Suzuki, D.D.S. ----------------------------------------- Y. Paul Suzuki, D.D.S., President PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman ---------------------------------------- Its: Senior VP ---------------------------------------- /s/ Paul Suzuki, D.D.S. -------------------------------------------- Paul Suzuki, D.D.S. INDEX TO EXHIBITS Exhibit Description - ------- ----------- Annex I Merger Consideration A Target Companies 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 4.16 Excluded Assets and Excluded Liabilities 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.51 47 EXHIBIT 2.51 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., AND DONALD F. TAMBORELLO, D.D.S. TABLE OF CONTENTS
Page ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. . . . . . . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. 2.1 EXISTENCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. . . . . . . . . . . . . 3 2.4 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 [INTENTIONALLY DELETED]. . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.6 [INTENTIONALLY DELETED]. . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 DENTIST'S FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . 3 2.8 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.9 CONDITION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. . . . . . . . . . . . . . . . . . . 3 2.11 INVENTORIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. . . . . . . . . . . . . . . . . . . . 3 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES . . . . . . . . . . 4 2.14 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.16 SUBSEQUENT EVENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.19 LIABILITIES; DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.20 INSURANCE POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.21 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.22 ADVERSE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.23 COMPLIANCE WITH LAWS IN GENERAL. . . . . . . . . . . . . . . . . . . . . . 7 2.24 THIRD PARTY PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.25 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 7 2.26 BANKING RELATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS . . . . . . . . . . 8 2.28 PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING . . . . . . . . . . . . . . . . . . . . 8 3.2 POWER AND AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.3 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.4 CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.5 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 4. COVENANTS OF DENTIST. 4.1 CONSUMMATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 9 4.2 BUSINESS OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.3 ACCESS AND NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. . . . . . . . . . . . 9 4.5 ACQUISITION PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . 9 4.7 EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.8 [INTENTIONALLY OMITTED]. . . . . . . . . . . . . . . . . . . . . . . . . .10 4.9 REQUIREMENTS TO EFFECT ACQUISITION . . . . . . . . . . . . . . . . . . . .10 4.10 ACCOUNTING AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . .10 4.11 WAIVER OF BULK TRANSFER COMPLIANCE . . . . . . . . . . . . . . . . . . . .10 4.12 LEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 4.13 HIRING OF EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . . . . . .10 4.14 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . .10 4.15 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 4.16 FORMATION OF THE PRACTICE. . . . . . . . . . . . . . . . . . . . . . . . .10 4.17 CORPORATE RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 4.18 POWER AND AUTHORITY FOR TRANSACTIONS . . . . . . . . . . . . . . . . . . .11 4.19 NO BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 4.20 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . .11 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. . . . . . . . . . . .11 Section 6. COVENANTS OF PENTEGRA AND DENTIST 6.1 FILINGS; OTHER ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . .12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . .12 7.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . .12 7.3 PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 7.4 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . . .12 7.5 DUE DILIGENCE REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . .12 7.6 APPROVAL BY THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . .12 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. . . . . . . . . . . . . . . . . . .13 7.8 EMPLOYMENT ARRANGEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . .13 7.9 CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . .13 7.10 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 7.11 DEBT AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . .13 7.12 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 7.13 NO CHANGE IN WORKING CAPITAL . . . . . . . . . . . . . . . . . . . . . . .13 7.14 SECURITIES APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Section 8. DENTIST'S CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . .13 8.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . .13 8.3 PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 8.4 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 8.5 SECURITIES APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . .14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF DENTIST. . . . . . . . . . . . . . . . . . . . . . . . . . .14 9.2 DELIVERIES OF PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . . .15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . .15 10.2 INDEMNIFICATION BY PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . .16 10.3 INDEMNIFICATION BY DENTIST . . . . . . . . . . . . . . . . . . . . . . . .16 10.4 INDEMNIFICATION PROCEDURE. . . . . . . . . . . . . . . . . . . . . . . . .17 10.5 RIGHT OF SETOFF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .18 12.2 INVESTMENTS; COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . . .19 12.3 ECONOMIC RISK; SOPHISTICATION. . . . . . . . . . . . . . . . . . . . . . .19 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . .20 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . .21 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . .21 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . .21 14.12 NO RULE OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . .21 14.13 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.14 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.15 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . .21 14.16 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 14.17 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra") and Donald F. Tamborello, D.D.S. ("Dentist"). WITNESSETH: WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires to receive from Dentist, certain assets of Dentist; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Dentist, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Dentist shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Dentist's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Dentist shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Dentist contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Dentist the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(B) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Dentist, including, but not limited to, liabilities arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by Dentist, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Dentist reflected on the books of Dentist at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Dentist, any licensed professional employee or independent contractor of Dentist, (vi) any liability for the payment of any taxes of Dentist, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Dentist. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Dentist shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. Dentist hereby represents and warrants to Pentegra as follows: 2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the State of Texas. Dentist does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Dentist and constitute or will constitute the legal, valid and binding obligations of Dentist in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Dentist is a party or by which Dentist is bound, or violate any material restrictions of any kind to which Dentist is subject, or result in any lien or encumbrance on any of Dentist's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Dentist, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Dentist. 2.5 [INTENTIONALLY DELETED]. 2.6 [INTENTIONALLY DELETED]. 2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Dentist as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Dentist. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Dentist leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Dentist, as lessor or lessee, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Dentist has not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Dentist has no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Dentist, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Dentist has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Dentist, including the names of any entities from whom Dentist previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Dentist in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Dentist has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the most recent payroll report of Dentist, showing all current employees of Dentist and their current levels of compensation, (b) promised increases in compensation of employees of Dentist that have not yet been effected, (c) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Dentist is a party, copies of which have been delivered to Pentegra, and (d) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Dentist is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Dentist has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Dentist, and Dentist has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the Assets is subject to any pending, nor does Dentist have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Dentist, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Dentist, no basis for any such action exists, nor is there any legal impediment of which Dentist has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Dentist ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Dentist, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default. Dentist has no knowledge of any default by any other party to such Contracts. Dentist has not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Dentist, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Dentist on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (d) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (e) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Dentist since the Balance Sheet Date; (f) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (g) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (h) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (i) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (j) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (k) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; or (l) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Dentist has not received any notice that any tax deficiency or delinquency has been or may be asserted against Dentist. There are no audits relating to taxes of Dentist pending or in process or, to the knowledge of Dentist, threatened. Dentist is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Dentist. Dentist has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Dentist nor any predecessor of Dentist is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Dentist has delivered to Pentegra correct and complete copies of Dentist's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Dentist during the three calendar year period preceding the date of this Agreement. Dentist has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Dentist does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Nothing contained herein shall prohibit Dentist from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Dentist resulting from any action taken by Dentist or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Dentist does not know, or have reasonable grounds to know, of any basis for the assertion against Dentist as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Dentist (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Dentist has not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Dentist nor any licensed professional employee of Dentist has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Dentist has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Dentist has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Dentist Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Dentist Plans. Dentist has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Dentist Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Dentist or any licensed professional employee of Dentist of any Federal, state or local law or regulation. Dentist has not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Dentist. 2.24 THIRD PARTY PAYORS. Dentist and each licensed professional employee or independent contractor of Dentist has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Dentist and each licensed professional employee of Dentist. Neither Dentist nor any licensed professional employee of Dentist has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Dentist and Dentist's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by Dentist or to be furnished by Dentist to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Dentist has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or employee or family member of Dentist, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Dentist or any organization that has a material contract or arrangement with Dentist. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Dentist's services which accounted for more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has good relations with all such payors and other material payors of Dentist and none of such payors has notified Dentist that it intends to discontinue its relationship with Dentist or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Dentist as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF DENTIST. Dentist agrees that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Dentist agrees to complete the Exhibits hereto to be provided by him in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the Assets in the ordinary course. Dentist shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Dentist shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Dentist shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Dentist. Dentist shall collect its receivables and pay its trade payables in the ordinary course of business. Dentist shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Dentist, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Dentist, the Business or the Assets as Pentegra or its representatives may request. Dentist shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Dentist is a party or relating to the Business or the Assets, and (b) any adverse change in Dentist's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall use his best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Dentist shall not, and shall use its best efforts to cause Dentist's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to the Dentist, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Dentist or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Dentist will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Dentist shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Dentist or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Dentist to any employee or other person or entity (including, without limitation, any Dentist Plan and any liability under employment contracts with Dentist) allocable to services performed prior to the Closing Date. Dentist acknowledges that the purpose and intent of this covenant is to assure that Pentegra shall have no liability whatsoever at any time after the Closing Date with respect to any of Dentist's employees or similar persons or entities, including, without limitation, any Dentist Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of the Dentist (other than in the ordinary course of business) or other employee or an independent contractor of Dentist, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Dentist, its business, assets or prospects. 4.8 [INTENTIONALLY OMITTED]. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material respect the tax or financial accounting methods or practices followed by Dentist (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Dentist will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Dentist required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Dentist covenants and agrees that all of the creditors with respect to the Business and the Assets will be paid in full by Dentist prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Dentist may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Dentist agrees to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Dentist leases any of its premises from the Dentist or other affiliate of Dentist, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Dentist designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Dentist shall remain liable under any Dentist Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Dentist's employees incurred by Dentist prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and shall be treated as Clinic employees for purposes of eligibility and participation in Dentist Plans. 4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the Dentist and the Practice are to practice dentistry. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Dentist shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and has filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND DENTIST. Pentegra and Dentist agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Dentist shall furnish all information concerning Dentist as may be reasonable requested in connection with any such action. Dentist represents and warrants that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Dentist shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Dentist shall furnish Pentegra will all information concerning itself and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Dentist contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Dentist prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Dentist, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Dentist shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Dentist shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her employment agreement and executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra. 7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Dentist and its affiliates and Dentist shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured on its liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Dentist since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. DENTIST'S CONDITIONS PRECEDENT. The obligations of Dentist hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly executed in form satisfactory to Dentist and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF DENTIST. Within five business days after requested by Pentegra, Dentist shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a bill of sale conveying the Assets to Pentegra; (d) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (e) certificates of Dentist dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Dentist contained herein; (ii) as to the performance of and compliance by Dentist with all covenants contained herein; and (iii) certifying that all conditions precedent of Dentist to the Closing have been satisfied; (f) an opinion of counsel to Dentist opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Dentist, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (g) non-foreign affidavits executed by Dentist; (h) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (i) an executed Registration Rights Agreement between Pentegra and Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (j) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Dentist the following, all of which shall be in a form satisfactory to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Dentist; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Dentist; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Dentist to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Dentist or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Dentist giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Dentist contained in this Agreement or in any certificate or other document executed and delivered by Dentist pursuant to this Agreement is or becomes untrue or breached in any material respect or if Dentist fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Dentist if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra or Dentist if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Dentist, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Dentist pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the shares of Pentegra Common Stock to be delivered to Dentist pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Dentist covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Dentist resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect its own interests in connection with the acquisition of the Pentegra Common Stock. Dentist and its representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Dentist and its representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Dentist is an "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes and acknowledges that it had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Dentist agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Dentist, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Dentist shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Dentist reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Dentist is the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Dentist from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Dentist and Pentegra shall be filed in a manner consistent with such intention and Dentist and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Dentist: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Dentist for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Dentist. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Dentist, be relieved from its obligations to Dentist under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Dentist, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoenix, Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. PENTEGRA DENTAL GROUP, INC. By: /s/ James L. Dunn, Jr. ---------------------------------------- Its: Senior Vice President --------------------------------------- /s/ Donald Tamborello ------------------------------------------- Donald F. Tamborello, D.D.S. INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 [intentionally omitted] 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.52 48 EXHIBIT 2.52 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., AND HELENA THOMAS, D.D.S. TABLE OF CONTENTS PAGE Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. . . . . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. 2.1 EXISTENCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. . . . . . . . . . . 3 2.4 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 [INTENTIONALLY DELETED]. . . . . . . . . . . . . . . . . . . . . . . . 3 2.6 [INTENTIONALLY DELETED]. . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 DENTIST'S FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . 3 2.8 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.9 CONDITION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. . . . . . . . . . . . . . . . . 3 2.11 INVENTORIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. . . . . . . . . . . . . . . . . . 3 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES . . . . . . . . 4 2.14 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.16 SUBSEQUENT EVENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.19 LIABILITIES; DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.20 INSURANCE POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.21 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . 6 2.22 ADVERSE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.23 COMPLIANCE WITH LAWS IN GENERAL. . . . . . . . . . . . . . . . . . . . 7 2.24 THIRD PARTY PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.25 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . 7 2.26 BANKING RELATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS . . . . . . . . 8 2.28 PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING . . . . . . . . . . . . . . . . . . 8 3.2 POWER AND AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.3 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.4 CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.5 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . 8 Section 4. COVENANTS OF DENTIST. 4.1 CONSUMMATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . 9 4.2 BUSINESS OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.3 ACCESS AND NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. . . . . . . . . . 9 4.5 ACQUISITION PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . . 9 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . 9 4.7 EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.8 [INTENTIONALLY OMITTED]. . . . . . . . . . . . . . . . . . . . . . . . 10 4.9 REQUIREMENTS TO EFFECT ACQUISITION . . . . . . . . . . . . . . . . . . 10 4.10 ACCOUNTING AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . 10 4.11 WAIVER OF BULK TRANSFER COMPLIANCE . . . . . . . . . . . . . . . . . . 10 4.12 LEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.13 HIRING OF EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.14 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . 10 4.15 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.16 FORMATION OF THE PRACTICE. . . . . . . . . . . . . . . . . . . . . . . 10 4.17 CORPORATE RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.18 POWER AND AUTHORITY FOR TRANSACTIONS . . . . . . . . . . . . . . . . . 11 4.19 NO BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.20 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . 11 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. . . . . . . . . . 11 Section 6. COVENANTS OF PENTEGRA AND DENTIST 6.1 FILINGS; OTHER ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 12 7.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 12 7.3 PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.4 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . 12 7.5 DUE DILIGENCE REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.6 APPROVAL BY THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . 12 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. . . . . . . . . . . . . . . . . 13 7.8 EMPLOYMENT ARRANGEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.12 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.13 NO CHANGE IN WORKING CAPITAL . . . . . . . . . . . . . . . . . . . . . 13 7.14 SECURITIES APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 8. DENTIST'S CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 13 8.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 13 8.3 PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.4 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.5 SECURITIES APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF DENTIST. . . . . . . . . . . . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . 15 10.2 INDEMNIFICATION BY PENTEGRA. . . . . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY DENTIST . . . . . . . . . . . . . . . . . . . . . . 16 10.4 INDEMNIFICATION PROCEDURE. . . . . . . . . . . . . . . . . . . . . . . 17 10.5 RIGHT OF SETOFF. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 18 12.2 INVESTMENTS; COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION. . . . . . . . . . . . . . . . . . . . . 19 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . 20 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . 21 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . 21 14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . 21 14.12 NO RULE OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . 21 14.13 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . 21 14.14 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.15 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . 21 14.16 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.17 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 23 ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra") and Helena Thomas, D.D.S. ("Dentist"). WITNESSETH: WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires to receive from Dentist, certain assets of Dentist; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Dentist, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Dentist shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Dentist's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Dentist shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Dentist contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Dentist the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Dentist, including, but not limited to, liabilities arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by Dentist, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Dentist reflected on the books of Dentist at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Dentist, any licensed professional employee or independent contractor of Dentist, (vi) any liability for the payment of any taxes of Dentist, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Dentist. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Dentist shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. Dentist hereby represents and warrants to Pentegra as follows: 2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the State of Texas. Dentist does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Dentist and constitute or will constitute the legal, valid and binding obligations of Dentist in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Dentist is a party or by which Dentist is bound, or violate any material restrictions of any kind to which Dentist is subject, or result in any lien or encumbrance on any of Dentist's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Dentist, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Dentist. 2.5 [INTENTIONALLY DELETED]. 2.6 [INTENTIONALLY DELETED]. 2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Dentist as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Dentist. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Dentist leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Dentist, as lessor or lessee, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Dentist has not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Dentist has no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Dentist, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Dentist has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Dentist, including the names of any entities from whom Dentist previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Dentist in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Dentist has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the most recent payroll report of Dentist, showing all current employees of Dentist and their current levels of compensation, (b) promised increases in compensation of employees of Dentist that have not yet been effected, (c) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Dentist is a party, copies of which have been delivered to Pentegra, and (d) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Dentist is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Dentist has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Dentist, and Dentist has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the Assets is subject to any pending, nor does Dentist have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Dentist, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Dentist, no basis for any such action exists, nor is there any legal impediment of which Dentist has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Dentist ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Dentist, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default. Dentist has no knowledge of any default by any other party to such Contracts. Dentist has not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Dentist, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Dentist on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (d) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (e) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Dentist since the Balance Sheet Date; (f) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (g) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (h) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (i) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (j) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (k) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; or (l) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Dentist has not received any notice that any tax deficiency or delinquency has been or may be asserted against Dentist. There are no audits relating to taxes of Dentist pending or in process or, to the knowledge of Dentist, threatened. Dentist is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Dentist. Dentist has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Dentist nor any predecessor of Dentist is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Dentist has delivered to Pentegra correct and complete copies of Dentist's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Dentist during the three calendar year period preceding the date of this Agreement. Dentist has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Dentist does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Nothing contained herein shall prohibit Dentist from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Dentist resulting from any action taken by Dentist or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Dentist does not know, or have reasonable grounds to know, of any basis for the assertion against Dentist as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Dentist (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Dentist has not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Dentist nor any licensed professional employee of Dentist has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Dentist has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Dentist has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Dentist Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Dentist Plans. Dentist has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Dentist Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Dentist or any licensed professional employee of Dentist of any Federal, state or local law or regulation. Dentist has not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Dentist. 2.24 THIRD PARTY PAYORS. Dentist and each licensed professional employee or independent contractor of Dentist has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Dentist and each licensed professional employee of Dentist. Neither Dentist nor any licensed professional employee of Dentist has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Dentist and Dentist's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by Dentist or to be furnished by Dentist to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Dentist has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or employee or family member of Dentist, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Dentist or any organization that has a material contract or arrangement with Dentist. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Dentist's services which accounted for more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has good relations with all such payors and other material payors of Dentist and none of such payors has notified Dentist that it intends to discontinue its relationship with Dentist or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Dentist as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Pentegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF DENTIST. Dentist agrees that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Dentist agrees to complete the Exhibits hereto to be provided by him in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the Assets in the ordinary course. Dentist shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Dentist shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Dentist shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Dentist. Dentist shall collect its receivables and pay its trade payables in the ordinary course of business. Dentist shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Dentist, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Dentist, the Business or the Assets as Pentegra or its representatives may request. Dentist shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Dentist is a party or relating to the Business or the Assets, and (b) any adverse change in Dentist's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall use his best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Dentist shall not, and shall use its best efforts to cause Dentist's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to the Dentist, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Dentist or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Dentist will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Dentist shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Dentist or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Dentist to any employee or other person or entity (including, without limitation, any Dentist Plan and any liability under employment contracts with Dentist) allocable to services performed prior to the Closing Date. Dentist acknowledges that the purpose and intent of this covenant is to assure that Pentegra shall have no liability whatsoever at any time after the Closing Date with respect to any of Dentist's employees or similar persons or entities, including, without limitation, any Dentist Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of the Dentist (other than in the ordinary course of business) or other employee or an independent contractor of Dentist, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Dentist, its business, assets or prospects. 4.8 [INTENTIONALLY OMITTED]. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material respect the tax or financial accounting methods or practices followed by Dentist (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Dentist will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Dentist required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Dentist covenants and agrees that all of the creditors with respect to the Business and the Assets will be paid in full by Dentist prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Dentist may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Dentist agrees to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Dentist leases any of its premises from the Dentist or other affiliate of Dentist, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Dentist designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Dentist shall remain liable under any Dentist Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Dentist's employees incurred by Dentist prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and shall be treated as Clinic employees for purposes of eligibility and participation in Dentist Plans. 4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the Dentist and the Practice are to practice dentistry. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Dentist shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and has filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND DENTIST. Pentegra and Dentist agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Dentist shall furnish all information concerning Dentist as may be reasonable requested in connection with any such action. Dentist represents and warrants that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Dentist shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Dentist shall furnish Pentegra will all information concerning itself and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Dentist contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Dentist prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Dentist, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Dentist shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Dentist shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her employment agreement and executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra. 7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Dentist and its affiliates and Dentist shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured on its liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Dentist since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. DENTIST'S CONDITIONS PRECEDENT. The obligations of Dentist hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly executed in form satisfactory to Dentist and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF DENTIST. Within five business days after requested by Pentegra, Dentist shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a bill of sale conveying the Assets to Pentegra; (d) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (e) certificates of Dentist dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Dentist contained herein; (ii) as to the performance of and compliance by Dentist with all covenants contained herein; and (iii) certifying that all conditions precedent of Dentist to the Closing have been satisfied; (f) an opinion of counsel to Dentist opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Dentist, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (g) non-foreign affidavits executed by Dentist; (h) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (i) an executed Registration Rights Agreement between Pentegra and Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (j) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Dentist the following, all of which shall be in a form satisfactory to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Dentist; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Dentist; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Dentist to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Dentist or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Dentist giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Dentist contained in this Agreement or in any certificate or other document executed and delivered by Dentist pursuant to this Agreement is or becomes untrue or breached in any material respect or if Dentist fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Dentist if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra or Dentist if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Dentist, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Dentist pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the shares of Pentegra Common Stock to be delivered to Dentist pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Dentist covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Dentist resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect its own interests in connection with the acquisition of the Pentegra Common Stock. Dentist and its representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Dentist and its representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Dentist is an "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes and acknowledges that it had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Dentist agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Dentist, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Dentist shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Dentist reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Dentist is the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Dentist from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Dentist and Pentegra shall be filed in a manner consistent with such intention and Dentist and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Dentist: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Dentist for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Dentist. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Dentist, be relieved from its obligations to Dentist under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Dentist, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoenix, Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. PENTEGRA DENTAL GROUP, INC. By: /s/ James L. Dunn, Jr. ------------------------------------ Its: Senior Vice President ------------------------------------ /s/ Helena Thomas, D.D.S. ------------------------------------------- Helena Thomas, D.D.S. INDEX TO EXHIBITS Exhibit Description - ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 [intentionally omitted] 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.53 49 EXHIBIT 2.53 EXHIBIT 2.53 AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG PENTEGRA DENTAL GROUP, INC., LOUIS J. THORNLEY, D.D.S., P.S., and LOUIS J. THORNLEY, D.D.S. TABLE OF CONTENTS PAGE Section 1. TERMS OF THE REORGANIZATION 1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . 2 1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . 4 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . 9 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . 11 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . 12 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . 13 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . 13 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . 13 Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . 13 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 14 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . 14 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . 14 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . 14 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . 14 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . 14 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . 14 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . 14 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . 14 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . 14 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . 15 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 15 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . 15 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . 15 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . 15 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . 16 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . 17 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . 17 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . 18 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . 19 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 20 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . 20 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . 21 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . 22 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . 22 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . 22 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . 22 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . 22 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . 23 14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . 23 14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . 23 14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), LOUIS J. THORNLEY, D.D.S., P.S., an Alaska professional corporation ("Company") and LOUIS J. THORNLEY, D.D.S., shareholder of Company (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Company operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, the Boards of Directors of the Company and Pentegra have determined that a reorganization between each of them is in the best interests of their respective companies; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Company, the "Target Companies") and simultaneously with the closing of the reorganization contemplated herein, intends to consummate its initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock"); WHEREAS, it is intended for Federal income tax purposes that the reorganization contemplated by this Agreement shall qualify as an reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE REORGANIZATION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 MERGER. Subject to and upon the terms and conditions contained herein, on the Closing Date, the Company shall be merged with and into Pentegra (or its designated affiliate, in which case, the references herein to Pentegra shall be to such designated affiliate and its shares of common stock) in accordance with this Agreement and the separate corporate existence of the Company shall thereupon cease ("Merger"). Pentegra shall be the surviving corporation in the Merger ("Surviving Corporation") and shall continue to be governed by the laws of the State of Delaware and the separate corporate existence of Pentegra with all rights, privileges, powers, immunities and purposes shall continue unaffected by the Merger. The Merger shall have the effects specified in the Delaware General Corporation Law and the Alaska Business Corporation Law. If all the conditions to the Merger set forth herein shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated in accordance herewith, the parties hereto shall cause to be properly executed and filed on the Closing Date Certificates of Merger for the Company meeting the applicable legal requirements. The Mergers shall become effective on the Closing Date or the filing of such documents, in accordance with applicable law, or at such later time as the parties hereto have agreed upon and designated in such merger filings. 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation until duly amended in accordance with their terms. 1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra immediately prior to the effective date of the Merger shall be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. The persons who are officers of Pentegra immediately prior to the effective date of the Merger shall be the officers of the Surviving Corporation and shall hold their respective offices until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal. 1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and without any action on the part of the holder thereof, all shares of the Company's common stock issued and outstanding on the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired and shall cease to exist, and each holder of a certificate of representing shares of Company common stock shall thereafter cease to have any rights with respect to such shares except the right to receive the consideration set forth on ANNEX I attached hereto (the "Merger Consideration"). Each share of common stock of the Company held in treasury at the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired without payment of any consideration therefor. On the effective date of the Merger, each share of Pentegra Common Stock issued and outstanding shall, by virtue of the Mergers, and without any action on the part of the holder thereof, continue unchanged and remain outstanding as a share of validly issued, fully paid and nonassessable share of Surviving Corporation common stock. 1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger, the Shareholders, as the holders of a certificate or certificates representing shares of Company common stock shall, upon surrender of such certificate or certificates, receive the Merger Consideration, and until the certificate or certificates of Company common stock shall have been surrendered by the Shareholder and replaced by a certificate or certificates representing Pentegra Common Stock (as set forth on ANNEX I), the certificate or certificates of Company common stock shall, for all purposes be deemed to evidence ownership of the number of shares of Pentegra Common Stock determined in accordance with the provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the Shareholders in the Merger shall be deemed for all purposes to have been issued by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at Closing the certificate or certificates representing the Company common stock owned by them, duly endorsed in blank by the Shareholders, or accompanied by duly executed blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the Shareholder's expense, affixed and cancelled. 1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Company and Shareholders shall excecute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Alaska. Company has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Company does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Company a party to any joint venture or partnership. The Shareholders are the sole shareholders of Company and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Company are owned by Company in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Company on any matter, (b) securities of Company convertible into equity interests in Company, or (c) commitments, options, rights or warrants to issue any such equity interests in Company, to issue securities of Company convertible into such equity interests, or to redeem any securities of Company. No shares of capital stock of Company have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Company's stockholders. Company is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Company does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Company has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Company and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Company and Shareholders, enforceable against Company and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Company or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Company or any Shareholder is a party or by which Company or any Shareholder is bound, or violate any material restrictions of any kind to which Company is subject, or result in any lien or encumbrance on any of Company's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Company and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Company or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Company on any of its capital stock since the Balance Sheet Date. No repurchase of any of Company's capital stock has been approved, effected or is pending, or is contemplated by Company. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Company and all amendments thereto have been delivered to Pentegra. The minute books of Company contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Company since its formation. The books of account of Company have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Company have been properly recorded in such books. 2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Company as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Company. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Company or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Company, as lessor or lessee, or any condition or event of which any Shareholder or Company has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Company or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Company and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Company, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Company has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Company, including the names of any entities from whom Company previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Company in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Company has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Company and the offices held by each, (b) the most recent payroll report of Company, showing all current employees of Company and their current levels of compensation, (c) promised increases in compensation of employees of Company that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Company is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Company is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Company has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Company, and Company has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the Business nor any of the Assets is subject to any pending, nor does Company or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Company, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Company and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Company or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Company has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Company ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Company or any Shareholder, or any condition or event of which Company or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Company and Shareholders have no knowledge of any default by any other party to such Contracts. Company and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Company or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Company on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Company since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Company; (o) Repurchased, approved any repurchase or agreed to repurchase any of Company's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Company has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Company has not received any notice that any tax deficiency or delinquency has been or may be asserted against Company. There are no audits relating to taxes of Company pending or in process or, to the knowledge of Company, threatened. Company is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Company. Company has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Company nor any predecessor of Company is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Company has delivered to Pentegra correct and complete copies of Company's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Company during the three calendar year period preceding the date of this Agreement. Company has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) No Shareholder presently intends to dispose of any of the shares of Pentegra Common Stock to be received hereunder nor is a party to any plan, arrangement or agreement for the disposition of such shares. Company and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Shareholders from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Company or Company's shareholders resulting from any action taken by Company or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Company or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Company (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed professional of Company carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Company have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Company, nor any Shareholder nor any licensed professional employee of Company has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Company has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company Plan," and collectively "Company Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Company has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Company Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Company Plans. Company has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Company Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Company, any Shareholder or any licensed professional employee of Company of any Federal, state or local law or regulation. Company and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Company. 2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed professional employee or independent contractor of Company has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Company, any Shareholder and each licensed professional employee of Company. Neither Company, nor any Shareholder, nor any licensed professional employee of Company has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Company, Shareholders and Company's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Company or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Company has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Company, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Company or any organization that has a material contract or arrangement with Company. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Company's services which accounted for more than 10% of revenues of Company in the preceding fiscal year. Company has good relations with all such payors and other material payors of Company and none of such payors has notified Company that it intends to discontinue its relationship with Company or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Company and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the reorganization contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the reorganization contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Company or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Company and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the Business and use the Assets in the ordinary course. Company and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Company and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Company and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Company. Company and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Company and Shareholders shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Company, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Company, the Business or the Assets as Pentegra or its representatives may request. Company and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Company is a party or relating to the Business or the Assets, and (b) any adverse change in Company's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Company and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Company and Shareholders shall not, and shall use its best efforts to cause Company's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Company or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Company and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Company and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Company or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Company to any employee or other person or entity (including, without limitation, any Company Plan and any liability under employment contracts with Company) allocable to services performed prior to the Closing Date. Company and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Company's employees or similar persons or entities, including, without limitation, any Company Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Company shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Company, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Company, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Company, nor will any repurchase of any of Company's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the reorganization contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Company (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Company and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Company required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Company hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Company and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Company prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Company and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Company and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Company leases any of its premises from any Shareholder or other affiliate of Company or any shareholder of Company, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dentist employees of Company designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Company and Shareholders shall remain liable under any Company Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Company's employees incurred by Company prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Company and shall be treated as Clinic employees for purposes of eligibility and participation in Company Plans. 4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. The Shareholders shall have formed a limited liability company, partnership or other legal entity (the "Practice") approved by Pentegra for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the practice of dentistry is conducted by the Shareholders and the Practice. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Shareholders shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall quality to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. The Company shall have transferred the Excluded Assets set forth on EXHIBIT 4.16 to the Practice and shall have caused the Practice to assume the Excluded Liabilities set forth on EXHIBIT 4.16 in exchange for equity interest in the Practice, and the Company shall have distributed such equity interests in the Practice to the Shareholders. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra and shall be in form and substance satisfactory to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and have filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS. Pentegra, Shareholders and Company agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Company and Shareholders shall furnish all information concerning Company and Shareholders as may be reasonable requested in connection with any such action. Company and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Company and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Company and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Company and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Company and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Company, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Practice. Each Shareholder shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Company shall have terminated, and caused each shareholder of Company that has an existing employment agreement with Company to have terminated his or her employment agreement with Company and shall have executed an employment agreement ("Employment Agreement") with the Practice in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Company and Pentegra. 7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Company and its shareholders or affiliates and Company shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Company since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Company and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Company shall have received all documents, duly executed in form satisfactory to Company and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days after requested by Pentegra, Company and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Company authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) executed merger certificate and/or plan as required by applicable state law; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra and the original stock certificates together with blank stock powers representing the outstanding shares of Company common stock; (f) certificates of the Shareholders and a duly authorized officer of Company dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Company and Shareholder contained herein; (ii) as to the performance of and compliance by Company and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Company and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Company certifying as to the incumbency of the directors and officers of Company and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Company; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Company and any state of required foreign qualification of Company establishing that Company is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Company and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Company, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Company; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Company and Shareholders, the following, all of which shall be in a form satisfactory to counsel to Company and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Merger Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Company; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Company; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Company to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Company and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Company or any Shareholder or Pentegra giving rise to indemnification under SECTION 10.2, 10.3 or SECTION 10.4 hereof, Pentegra, Contributor or Shareholder, as applicable, shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, Contributor or Shareholder, as applicable, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Company or any Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Company or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Company or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Company or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Company if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Company, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Company pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Company pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Each Shareholder covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Company resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Company and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Company or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Company and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Company and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Company and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Company and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement will qualify as a reorganization within the meaning of Section 368(a) of the Code. The tax returns (and schedules thereto) of Shareholders, Company and Pentegra shall be filed in a manner consistent with such intention and Shareholders and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Company and Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Company or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Company. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Company, be relieved from its obligations to Company under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Company, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Company and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Company or may demand from Company, and Company agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Companys or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. LOUIS J. THORNLEY, D.D.S., P.C. By: /s/ Louis J. Thornley, D.D.S. ----------------------------------- Its: Pres ---------------------------------- PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman ----------------------------------- Its: Senior Vice President ---------------------------------- /s/ Louis J. Thornley, D.D.S. ------------------------------------ Louis J. Thornley, DDS INDEX TO EXHIBITS Exhibit Description - ------- ----------- Annex I Merger Consideration A Target Companies 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 4.16 Excluded Assets and Excluded Liabilities 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.54 50 EXHIBIT 2.54 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., S. VICTOR UHRENHOLDT., D.D.S., P.C. and S. Victor Uhrenholdt, D.D.S. TABLE OF CONTENTS
Page ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . 3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . . 8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . . 12 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . 12 Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 13 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . . 13 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . 13 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . . . . . . . 13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . 13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 14 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. . . . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS . . . . . . . . . . . . . . 17 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . 18 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . . 20 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . 21 14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . 22 14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), S. Victor Uhrenholdt, D.D.S., P.C. ("Contributor") and S. Victor Uhrenholdt, D.D.S., shareholders of Contributor (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Contributor operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra desires to receive from Contributor, certain assets of Contributor; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Contributor, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Contributor shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Contributor's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Contributor shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Contributor contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Contributor the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Contributor listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Contributor, including, but not limited to, liabilities arising under any Contributor Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by any Shareholder or Contributor, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Contributor reflected on the books of Contributor at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Contributor, any licensed professional employee or independent contractor of Contributor or any Shareholder, (vi) any liability for the payment of any taxes of Contributor or any Shareholder, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Contributor or any Shareholder. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, Contributor and Shareholders shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS. Contributor and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Contributor is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Texas. Contributor has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Contributor does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Contributor a party to any joint venture or partnership. The Shareholders are the sole shareholders of Contributor and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Contributor's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Contributor are owned by Contributor in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Contributor on any matter, (b) securities of Contributor convertible into equity interests in Contributor, or (c) commitments, options, rights or warrants to issue any such equity interests in Contributor, to issue securities of Contributor convertible into such equity interests, or to redeem any securities of Contributor. No shares of capital stock of Contributor have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Contributor's stockholders. Contributor is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Contributor does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Contributor has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Contributor and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Contributor and Shareholders, enforceable against Contributor and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Contributor or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Contributor or any Shareholder is a party or by which Contributor or any Shareholder is bound, or violate any material restrictions of any kind to which Contributor is subject, or result in any lien or encumbrance on any of Contributor's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Contributor and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Contributor or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Contributor on any of its capital stock since the Balance Sheet Date. No repurchase of any of Contributor's capital stock has been approved, effected or is pending, or is contemplated by Contributor. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Contributor and all amendments thereto have been delivered to Pentegra. The minute books of Contributor contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Contributor since its formation. The books of account of Contributor have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Contributor have been properly recorded in such books. 2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Contributor as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Contributor. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Contributor or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Contributor, as lessor or lessee, or any condition or event of which any Shareholder or Contributor has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Contributor or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Contributor and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Contributor, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Contributor has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Contributor, including the names of any entities from whom Contributor previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Contributor is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Contributor in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Contributor has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Contributor and the offices held by each, (b) the most recent payroll report of Contributor, showing all current employees of Contributor and their current levels of compensation, (c) promised increases in compensation of employees of Contributor that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Contributor is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Contributor is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Contributor has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Contributor, and Contributor has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Contributor nor the Business nor any of the Assets is subject to any pending, nor does Contributor or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Contributor, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Contributor and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Contributor or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Contributor ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Contributor or any Shareholder, or any condition or event of which Contributor or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Contributor and Shareholders have no knowledge of any default by any other party to such Contracts. Contributor and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Contributor are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Contributor or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Contributor on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Contributor has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Contributor since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Contributor; (o) Repurchased, approved any repurchase or agreed to repurchase any of Contributor's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Contributor has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Contributor has not received any notice that any tax deficiency or delinquency has been or may be asserted against Contributor. There are no audits relating to taxes of Contributor pending or in process or, to the knowledge of Contributor, threatened. Contributor is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Contributor. Contributor has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Contributor nor any predecessor of Contributor is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Contributor has delivered to Pentegra correct and complete copies of Contributor's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Contributor during the three calendar year period preceding the date of this Agreement. Contributor has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Contributor does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Contributor and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Contributor from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Contributor or Contributor's shareholders resulting from any action taken by Contributor or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Contributor did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Contributor and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Contributor or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Contributor (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Contributor, each Shareholder and each licensed professional of Contributor carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Contributor have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Contributor, nor any Shareholder nor any licensed professional employee of Contributor has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Contributor has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Contributor Plan," and collectively "Contributor Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Contributor has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Contributor Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Contributor Plans. Contributor has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Contributor Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Shareholders and Contributor's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Contributor, any Shareholder or any licensed professional employee of Contributor of any Federal, state or local law or regulation. Contributor and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Contributor. 2.24 THIRD PARTY PAYORS. Contributor, Shareholders and each licensed professional employee or independent contractor of Contributor has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Contributor, any Shareholder and each licensed professional employee of Contributor. Neither Contributor, nor any Shareholder, nor any licensed professional employee of Contributor has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Contributor, Shareholders and Contributor's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Contributor or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Contributor or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Contributor has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Contributor, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Contributor or any organization that has a material contract or arrangement with Contributor. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Contributor's services which accounted for more than 10% of revenues of Contributor in the preceding fiscal year. Contributor has good relations with all such payors and other material payors of Contributor and none of such payors has notified Contributor that it intends to discontinue its relationship with Contributor or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Contributor and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Pentegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Contributor or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS. Contributor and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Contributor and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Contributor and Shareholders shall operate the Business and use the Assets in the ordinary course. Contributor and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Contributor and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Contributor and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Contributor. Contributor and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Contributor and Shareholders shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Contributor and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Contributor, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Contributor, the Business or the Assets as Pentegra or its representatives may request. Contributor and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Contributor is a party or relating to the Business or the Assets, and (b) any adverse change in Contributor's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Contributor and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of Contributor contemplated by the Service Agreement and to conduct the intended business of Contributor and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Contributor and Shareholders shall not, and shall use its best efforts to cause Contributor's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Contributor or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Contributor and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Contributor and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Contributor or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Contributor to any employee or other person or entity (including, without limitation, any Contributor Plan and any liability under employment contracts with Contributor) allocable to services performed prior to the Closing Date. Contributor and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Contributor's employees or similar persons or entities, including, without limitation, any Contributor Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Contributor, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Contributor, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Contributor, nor will any repurchase of any of Contributor's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Contributor and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Contributor (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Contributor and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Contributor required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Contributor hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Contributor and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Contributor prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Contributor and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Contributor and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Contributor and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Contributor leases any of its premises from any Shareholder or other affiliate of Contributor or any shareholder of Contributor, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Contributor and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Contributor designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Contributor and Shareholders shall remain liable under any Contributor Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Contributor's employees incurred by Contributor prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that all employees of Contributor hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Contributor and shall be treated as Clinic employees for purposes of eligibility and participation in Contributor Plans. 4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS. Pentegra, Shareholders and Contributor agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Contributor and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Contributor and Shareholders shall furnish all information concerning Contributor and Shareholders as may be reasonable requested in connection with any such action. Contributor and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Contributor and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Contributor and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Contributor and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Contributor and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Contributor and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Contributor shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Contributor, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra shall have executed and delivered a Service Agreement (the "Service Agreement"), in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which Pentegra will provide management services to the Contributor. Each Shareholder shall have executed and delivered a Guaranty Agreement in substantially the form attached as EXHIBIT 4.10 of the Service Agreement pursuant to which Shareholder shall, among other things, guaranty the obligations of Contributor under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and caused each shareholder of Contributor that has an existing employment agreement with Contributor to have terminated his or her employment agreement with Contributor and shall have executed an employment agreement ("Employment Agreement") with Contributor in form and substance attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Contributor and Pentegra. 7.9 CONSENTS AND APPROVALS. Contributor and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Contributor and its shareholders or affiliates and Contributor shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Contributor and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Contributor since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Contributor and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Contributor shall have received all documents, duly executed in form satisfactory to Contributor and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS. Within five business days after requested by Pentegra, Contributor and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a copy of the resolutions of the Board of Directors of Contributor authorizing the execution, delivery and performance of this Agreement, the Service Agreement, the Employment Agreements and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) a bill of sale conveying the Assets to Pentegra; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (f) certificates of the Shareholders and a duly authorized officer of Contributor dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Contributor and Shareholder contained herein; (ii) as to the performance of and compliance by Contributor and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Contributor and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Contributor certifying as to the incumbency of the directors and officers of Contributor and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Contributor; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Contributor and any state of required foreign qualification of Contributor establishing that Contributor is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Contributor and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Contributor, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Contributor; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Contributor, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Contributor and Shareholder, the following, all of which shall be in a form satisfactory to counsel to Contributor and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Contributor; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Contributor; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Contributor to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Contributor and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD CONTRIBUTOR AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING CONTRIBUTOR AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY CONTRIBUTOR AND SHAREHOLDERS. CONTRIBUTOR AND SHAREHOLDERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY CONTRIBUTOR OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE CONTRIBUTOR OR SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF CONTRIBUTOR OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF CONTRIBUTOR OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE CONTRIBUTOR OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Contributor or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Contributor or Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Contributor or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Contributor or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Contributor or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Contributor if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Contributor, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Contributor shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Contributor pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Contributor pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Contributor pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Contributor covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Contributor resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Contributor, Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Contributor, Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Contributor and Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Contributor and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Contributor or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Contributor and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Contributor and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Contributor and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Contributor or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Contributor and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Shareholders, Contributor and Pentegra shall be filed in a manner consistent with such intention and Contributor and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Contributor or Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Contributor or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Contributor. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF CONTRIBUTOR AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Contributor, be relieved from its obligations to Contributor under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Contributor, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Contributor and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Contributor or may demand from Contributor, and Contributor agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Contributors or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoenix, Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. S. Victor Uhrenholdt, D.D.S., P.C. By: /s/ S. Victor Uhrenholdt, D.D.S. ----------------------------------------- Its: President ----------------------------------------- PENTEGRA DENTAL GROUP, INC. By: /s/ James L. Dunn, Jr. ----------------------------------------- Its: Senior Vice President ----------------------------------------- /s/ S. Victor Uhrenholdt, D.D.S. -------------------------------------------- S. Victor Uhrenholdt, D.D.S. INDEX TO EXHIBITS Exhibit Description - ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.55 51 EXHIBIT 2.55 ASSET CONTRIBUTION AGREEMENT BY AND AMONG PENTEGRA DENTAL GROUP, INC., AND SCOTT VAN ZANDT, D.D.S. TABLE OF CONTENTS Page ---- Section 1. TERMS OF THE CONTRIBUTION 1.2 CONTRIBUTION OF ASSETS. . . . . . . . . . . . . . . . . . . . . 1 1.3 EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 1 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES . . . . . . . . . . . 2 1.5 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. 2.1 EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . 2 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 3 2.6 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . 3 2.7 DENTIST'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . 3 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . 3 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . 3 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . 3 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . 4 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . 6 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . 6 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . 6 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . 6 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . 7 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . 7 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . 7 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . 7 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . 7 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . 8 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . 8 3.2 POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . 8 3.3 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . 8 3.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.5 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . 8 Section 4. COVENANTS OF DENTIST. 4.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . 9 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . 9 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . 9 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . 9 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . 9 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . 9 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 9 4.8 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . 10 4.9 REQUIREMENTS TO EFFECT ACQUISITION. . . . . . . . . . . . . . . 10 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . 10 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . 10 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . 10 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . 10 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.16 FORMATION OF THE PRACTICE . . . . . . . . . . . . . . . . . . . 10 4.17 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . 11 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . 11 4.19 NO BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.20 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . 11 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . 11 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . 11 Section 6. COVENANTS OF PENTEGRA AND DENTIST 6.1 FILINGS; OTHER ACTIONS . . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . 12 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . 12 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . 12 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . 12 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . 12 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT . . . . . . . . . . . . . 13 7.8 EMPLOYMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . 13 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . 13 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . 13 Section 8. DENTIST'S CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . 13 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . 13 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . 13 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF DENTIST . . . . . . . . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . 15 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY DENTIST. . . . . . . . . . . . . . . . . . . 16 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . 17 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . 18 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . 19 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . 19 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . 20 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . 20 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . 20 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . 21 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . 21 14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . 21 14.12 NO RULE OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . 21 14.13 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . 21 14.14 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.15 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . 21 14.16 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.17 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . 23 ASSET CONTRIBUTION AGREEMENT This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra") and Scott Van Zandt, D.D.S. ("Dentist"). WITNESSETH: WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires to receive from Dentist, certain assets of Dentist; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Dentist, the "Target Companies"); WHEREAS, it is intended for Federal income tax purposes that the transfers contemplated by this Agreement, the Other Agreements and Pentegra's initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. . NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE CONTRIBUTION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions contained herein, on the Closing Date, Dentist shall convey, transfer, deliver and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all of Dentist's right, title and interest in and to those certain assets described on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively "Assets"), free and clear of all obligations, security interests, claims, liens and encumbrances, except as specifically assumed, or taken subject to, by Pentegra pursuant to SECTION 1.3(b) hereof. 1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be transferred and contributed hereunder, and Dentist shall retain all of its right, title and interest in and to, the assets not specifically transferred hereunder, including without limitation, the assets described on EXHIBIT 1.2 (the "Excluded Assets"). 1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the Assets and the representations, warranties and agreements of Dentist contained herein, Pentegra shall, on the Closing Date: (a) Cause to be transferred to Dentist the consideration specified in ANNEX I attached hereto (the "Acquisition Consideration"); and. (b) Except as otherwise provided herein, assume and perform or discharge on or after the Closing Date, the contracts, leases, obligations, commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b) attached hereto to the extent that such obligations, commitments, liabilities and indebtedness are current and not otherwise in default. (the "Assumed Liabilities"). Notwithstanding any contrary provision contained herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i) any liability, commitment or obligation or trade payable or indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under such contracts, leases, commitments or obligations which occurred on or before the Closing Date; (iii) any liability for any employee benefits payable to employees of Dentist, including, but not limited to, liabilities arising under any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any liability based upon or arising out of a violation of any antitrust or similar restraint-of-trade laws by Dentist, including, without limiting the generality of the foregoing, any such antitrust liability which may arise in connection with agreements, contracts, commitments or orders for the sale of goods or provision of services by Dentist reflected on the books of Dentist at or prior to the Closing Date; (v) any liability based upon or arising out of any tortious or wrongful actions of Dentist, any licensed professional employee or independent contractor of Dentist, (vi) any liability for the payment of any taxes of Dentist, including without limitation, sales, use and other transfer taxes and income taxes arising from or by reason of the transactions contemplated by this Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real property; nor (viii) any liability incurred or to be incurred pursuant to any malpractice or other suits or actions pending against Dentist. 1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Dentist shall execute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST. Dentist hereby represents and warrants to Pentegra as follows: 2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the State of Texas. Dentist does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Dentist and constitute or will constitute the legal, valid and binding obligations of Dentist in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Dentist is a party or by which Dentist is bound, or violate any material restrictions of any kind to which Dentist is subject, or result in any lien or encumbrance on any of Dentist's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All material building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Dentist, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Dentist. 2.5 [INTENTIONALLY DELETED]. 2.6 [INTENTIONALLY DELETED]. 2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Dentist as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Dentist. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Dentist leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Dentist, as lessor or lessee, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Dentist has not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Dentist has no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. Pentegra acknowledges that it has acquired the assets "where and as is" relying solely upon Pentegra's own examination. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Dentist, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Dentist has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Dentist, including the names of any entities from whom Dentist previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Dentist in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Dentist has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the most recent payroll report of Dentist, showing all current employees of Dentist and their current levels of compensation, (b) promised increases in compensation of employees of Dentist that have not yet been effected, (c) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Dentist is a party, copies of which have been delivered to Pentegra, and (d) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Dentist is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Dentist has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Dentist, and Dentist has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Except as set forth on Exhibit 2.16, neither Dentist nor the Business nor any of the Assets is subject to any pending, nor does Dentist have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Dentist, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Dentist, no basis for any such action exists, nor is there any legal impediment of which Dentist has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Dentist ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Dentist, or any condition or event of which Dentist has knowledge which with notice or lapse of time, or both, would constitute a default. Dentist has no knowledge of any default by any other party to such Contracts. Dentist has not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Dentist is not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Dentist, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Dentist on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement, other than in the course of business; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (d) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (e) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Dentist since the Balance Sheet Date; (f) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (g) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (h) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (i) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (j) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (k) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; or (l) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports and other statements) required to have been filed by it or have been properly extended, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Dentist has not received any notice that any tax deficiency or delinquency has been or may be asserted against Dentist. There are no audits relating to taxes of Dentist pending or in process or, to the knowledge of Dentist, threatened. Dentist is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Dentist. Dentist has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Dentist nor any predecessor of Dentist is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Dentist has delivered to Pentegra correct and complete copies of Dentist's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Dentist during the three calendar year period preceding the date of this Agreement. Dentist has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) Dentist does not intend to dispose of any of the shares of Pentegra Common Stock to be received hereunder and is not a party to any plan, arrangement or agreement for the disposition of such shares. Nothing contained herein shall prohibit Dentist from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Dentist resulting from any action taken by Dentist or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any material liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Dentist does not know, or have reasonable grounds to know, of any basis for the assertion against Dentist as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Dentist (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Dentist has not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Dentist nor any licensed professional employee of Dentist has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Dentist has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Dentist Plan," and collectively "Dentist Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. To the best of the Dentist's knowledge, no act or failure to act by Dentist has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Dentist Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Dentist Plans. Dentist has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Dentist Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Dentist or any licensed professional employee of Dentist of any Federal, state or local law or regulation. Dentist has not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Dentist. 2.24 THIRD PARTY PAYORS. Dentist and each licensed professional employee or independent contractor of Dentist has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Dentist and each licensed professional employee of Dentist. Neither Dentist nor any licensed professional employee of Dentist has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Dentist and Dentist's licensed professional employees have not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by Dentist or to be furnished by Dentist to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Dentist has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or employee (or their respective spouses, children or affiliates) owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Dentist or any organization that has a material contract or arrangement with Dentist. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Dentist's services which accounted for more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has good relations with all such payors and other material payors of Dentist and none of such payors has notified Dentist that it intends to discontinue its relationship with Dentist or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Dentist as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Pentegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the acquisition contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the acquisition contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF DENTIST. Dentist agrees that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Dentist agrees to complete the Exhibits hereto to be provided by him in form and substance satisfactory to both Dentist and Pentegra. 4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the Assets in the ordinary course. Dentist shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Dentist shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Dentist shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Dentist. Dentist shall collect its receivables and pay its trade payables in the ordinary course of business. Dentist shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Dentist, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Dentist, the Business or the Assets as Pentegra or its representatives may request. Dentist shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Dentist is a party or relating to the Business or the Assets, and (b) any adverse change in Dentist's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall use his best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Dentist shall not, and shall use its best efforts to cause Dentist's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to the Dentist, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Dentist or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Dentist will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Dentist shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Dentist or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Dentist to any employee or other person or entity (including, without limitation, any Dentist Plan and any liability under employment contracts with Dentist) allocable to services performed prior to the Closing Date. Dentist acknowledges that the purpose and intent of this covenant is to assure that Pentegra shall have no liability whatsoever at any time after the Closing Date with respect to any of Dentist's employees or similar persons or entities, including, without limitation, any Dentist Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of the Dentist (other than in the ordinary course of business) or other employee or an independent contractor of Dentist, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Dentist, its business, assets or prospects. 4.8 [INTENTIONALLY OMITTED]. 4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best efforts to take, or cause to be taken, all actions necessary to effect the acquisition contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material respect the tax or financial accounting methods or practices followed by Dentist (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Dentist will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Dentist required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Dentist covenants and agrees that all of the creditors with respect to the Business and the Assets will be paid in full by Dentist prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Dentist shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Dentist may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Dentist agrees to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Dentist leases any of its premises from the Dentist or other affiliate of Dentist, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dental employees of Dentist employed by the Dentist as of the Closing Date with, such employment to be effective as of the Closing Date. Notwithstanding the above, Dentist shall remain liable under any Dentist Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Dentist's employees incurred by Dentist prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and shall be treated as Clinic employees for purposes of eligibility and participation in Dentist Plans. 4.15 INSURANCE. Dentist shall agree to have and shall assist Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited liability company, partnership or other legal entity (the "Practice") for the purpose of practicing dentistry and entering into the Service Agreement. The Practice shall be duly organized, in existing and in good standing under the laws of the State in which the Dentist and the Practice are to practice dentistry. The Practice shall have all necessary power to own all of its assets and to carry on its business as such business is now being conducted. The Dentist shall be the sole member/shareholder/partner of the Practice and own all such interests free of all security interests, claims, encumbrances and liens. Each interest in the Practice shall be legally and validly issued and fully paid and nonassessable. There shall be no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the members/partners/shareholders of the Practice on any matter, (b) securities of the Practice convertible into equity interests in the Practice, or (c) commitments, options, rights or warrants to issue any such equity interests in the Practice, to issue securities of the Practice convertible into such equity interests, or to redeem any securities of the Practice. No interests of the Practice shall have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of the Practice's members/partners/shareholders. The Practice shall qualify to do business as a foreign entity in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. 4.17 CORPORATE RECORDS. True and correct copies of the Articles of Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations and minutes of the Practice and all amendments thereto of the Practice shall have been delivered to Pentegra. The minute books of the Practice shall contain all accurate minutes of the meetings of and consents to actions taken without meetings of the members\managers/partners/board of directors of the Practice since its formation. The books of account of the Practice shall have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of the Practice shall have been properly recorded in such books. 4.18 POWER AND AUTHORITY FOR TRANSACTIONS. The Practice shall have the power to execute, deliver and perform its obligations under all agreements and other documents to be executed and delivered by it pursuant to this Agreement, including without limitation, the Service Agreement and each Employment Agreement to be executed and delivered on the Closing Date, and has taken all action required by law, its Organization/Partnership Agreement/Articles of Incorporation, its Bylaws/Regulations or otherwise, to authorize the execution, delivery and performance of such documents. The Service Agreement, the Employment Agreement and the other agreements contemplated hereby shall have been duly executed and delivered by the Practice on the Closing Date and constitute or will constitute the legal, valid and binding obligations of the Practice enforceable against the Practice in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of the Service Agreement, the Employment Agreements and the other agreements contemplated hereby will not violate any provision of the organizational documents of the Practice or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which the Practice is a party or by which the Practice is bound, or violate any material restrictions of any kind to which the Practice is subject, or result in any lien or encumbrance on any of the Practice's assets. 4.19 NO BUSINESS. Other than its Articles of Organization/Partnership Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing Date, the Service Agreement and the Employment Agreements, the Practice shall not be a party to or subject to any agreement, indenture or other instrument. 4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all applicable laws, regulations and licensing requirements and has filed with the proper authorities all necessary statements and reports. SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra and Dentist agree to complete the Exhibits hereto to be provided by both parties. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND DENTIST. Pentegra and Dentist agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Dentist shall furnish all information concerning Dentist as may be reasonable requested in connection with any such action. Dentist represents and warrants that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Dentist shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Dentist shall furnish Pentegra will all information concerning itself and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Dentist contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Dentist prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Dentist shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Dentist, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra shall have executed and delivered a mutually agreeable Service Agreement (the "Service Agreement"), which may be in the form attached hereto as EXHIBIT 7.7, and otherwise satisfactory to Dentist and Pentegra, pursuant to which Pentegra will provide management services to the Practice. Dentist shall have executed and delivered a mutually agreeable Guaranty Agreement which may be in the form attached as EXHIBIT 4.10, and otherwise satisfactory to Dentist and Pentegra, of the Service Agreement pursuant to which Dentist shall, among other things, guaranty the obligations of the Practice under the Service Agreement. 7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her employment agreement and executed an mutually agreeable employment agreement ("Employment Agreement") with the Practice which may be in the form attached hereto as EXHIBIT 7.8 and otherwise satisfactory to Dentist and Pentegra. 7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables between Dentist and its affiliates and Dentist shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured on its liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Dentist since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. DENTIST'S CONDITIONS PRECEDENT. The obligations of Dentist hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly executed in form satisfactory to Dentist and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF DENTIST. On or before the Closing Date, Dentist shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) an executed original Service Agreement and executed originals of all documents required by that agreement, including but not limited to the Guaranty Agreement and security agreement referred to therein; (b) executed Employment Agreements; (c) a bill of sale conveying the Assets to Pentegra; (d) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra; (e) certificates of Dentist dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Dentist contained herein; (ii) as to the performance of and compliance by Dentist with all covenants contained herein; and (iii) certifying that all conditions precedent of Dentist to the Closing have been satisfied; (f) an opinion of counsel to Dentist opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Dentist, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (g) non-foreign affidavits executed by Dentist; (h) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (i) an executed Registration Rights Agreement between Pentegra and Dentist, in substantially the form attached hereto as EXHIBIT 9.1(L) (the "Registration Rights Agreement"); and (j) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Dentist the following, all of which shall be in a form satisfactory to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Acquisition Consideration; (b) an executed Service Agreement; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Dentist; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Dentist; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Dentist to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Dentist or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. (D) ANY LIABILITY OF PENTEGRA FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEY'S FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Dentist giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra, including the amounts payable under the Service Agreement. SECTION 11. TERMINATION. This Agreement may be terminated: (a)at any time by mutual agreement of all parties; (b)at any time by Pentegra if any representation or warranty of Dentist contained in this Agreement or in any certificate or other document executed and delivered by Dentist pursuant to this Agreement is or becomes untrue or breached in any material respect or if Dentist fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c)at any time by Dentist if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d)by Pentegra or Dentist if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e)by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Dentist, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received as consideration by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, received by any party hereunder as consideration, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, received by any party hereunder as consideration, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Dentist pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the shares of Pentegra Common Stock to be delivered to Dentist pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Dentist covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Dentist resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect its own interests in connection with the acquisition of the Pentegra Common Stock. Dentist and its representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Dentist and its representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Dentist is an "accredited investor" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes and acknowledges that it had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is a valuable, special and unique asset of Pentegra's businesses. Dentist agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Dentist, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Dentist shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Dentist reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Dentist is the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Dentist of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Dentist from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. Pentegra recognizes and acknowledges that it had in the past, currently have, and in the future may possibly have, access to certain confidential information of Dentist that is a valuable, special and unique asset of Dentist. Pentegra agrees that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Pentegra, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Pentegra shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Pentegra reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Pentegra is the sole and exclusive owner of such confidential information as a result of the transaction contemplated hereunder or otherwise. In the event of a breach or threatened breach by Pentegra of the provision of this SECTION 13. Dentist shall be entitled to an injunction restraining Pentegra from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement, together with the transactions contemplated by the Other Agreement and the Initial Public Offering, will qualify as an exchange meeting the requirements of Section 351 of the Code. The tax returns (and schedules thereto) of Dentist and Pentegra shall be filed in a manner consistent with such intention and Dentist and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Dentist: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Dentist for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Dentist. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF TEXAS AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS AND THE ESCROW LETTER ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Dentist, be relieved from its obligations to Dentist under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Dentist, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoenix, Arizona or the headquarters of Pentegra if other than Phoenix, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. PENTEGRA DENTAL GROUP, INC. By: /s/ James L. Dunn, Jr. ---------------------------------------- Its: Senior Vice President --------------------------------------- /s/ Scott Van Zandt, D.D.S. ------------------------------------------- Scott Van Zandt, D.D.S. INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Acquisition Consideration A Target Companies 1.1 Assets 1.2(b) Excluded Assets 1.3(b) Assumed Liabilities 2.1 [intentionally omitted] 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 7.7 Form of Service Agreement 7.8 Form of Employment Agreement 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-2.56 52 EXHIBIT 2.56 AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG PENTEGRA DENTAL GROUP, INC., RONALD M. YAROS, D.D.S., P.C. and RON YAROS, D.D.S.
TABLE OF CONTENTS Page ---- Section 1. TERMS OF THE REORGANIZATION 1.2 MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. . . . . . . . . . . . . . . . . . . . . . 2 1.7 SUBSEQUENT ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. 2.1 CORPORATE EXISTENCE; GOOD STANDING. . . . . . . . . . . . . . . . . . . . . . . 2 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . 3 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . . . . 3 2.4 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.6 CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 COMPANY'S FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 4 2.8 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.9 CONDITION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY . . . . . . . . . . . . . . . . . . . . . 4 2.11 INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES . . . . . . . . . . . . . . . . . . . . . . 4 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. . . . . . . . . . . . . 4 2.14 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.15 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 SUBSEQUENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.17 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.18 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.19 LIABILITIES; DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.20 INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.21 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.22 ADVERSE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.23 COMPLIANCE WITH LAWS IN GENERAL . . . . . . . . . . . . . . . . . . . . . . . . 8 2.24 THIRD PARTY PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.25 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.26 BANKING RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. . . . . . . . . . . . . 9 2.28 PAYORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA 3.1 CORPORATE EXISTENCE: GOOD STANDING. . . . . . . . . . . . . . . . . . . . . . . 9 3.2 POWER AND AUTHORITY; CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS . . . . . . . . . . . . . . . 9 3.4 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.6 COMMISSIONS AND FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.7 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.8 NO UNTRUE REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 4. COVENANTS OF COMPANY AND SHAREHOLDERS. 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . . . . 10 4.2 BUSINESS OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3 ACCESS AND NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . . . 10 4.5 ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . . . . 11 4.7 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.8 DISTRIBUTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.9 REQUIREMENTS TO EFFECT REORGANIZATION . . . . . . . . . . . . . . . . . . . . . 11 4.10 ACCOUNTING AND TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . 11 4.12 LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.13 HIRING OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.14 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.17 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.18 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.19 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.20 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 5. COVENANTS OF PENTEGRA 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS . . . . . . . . . . . . . . . . . . . . . . 12 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS . . . . . . . . . . . . . . 12 Section 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS 6.1 FILINGS; OTHER ACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 7. PENTEGRA CONDITIONS PRECEDENT 7.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . 13 7.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.4 NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.5 DUE DILIGENCE REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.6 APPROVAL BY THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . 13 7.7 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.8 [INTENTIONALLY DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.9 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.10 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.11 DEBT AND RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.12 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.13 NO CHANGE IN WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.14 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT 8.1 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . 14 8.2 COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.3 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.4 CLOSING DELIVERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.5 SECURITIES APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 9. CLOSING DELIVERIES 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . 14 9.2 DELIVERIES OF PENTEGRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 10.1 NATURE AND SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 10.2 INDEMNIFICATION BY PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . . . 16 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS . . . . . . . . . . . . . . . . . . 17 10.4 INDEMNIFICATION PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 10.5 RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11. TERMINATION Section 12. TRANSFER REPRESENTATIONS 12.1 TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 12.2 INVESTMENTS; COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . . . . 19 12.3 ECONOMIC RISK; SOPHISTICATION . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION Section 14. MISCELLANEOUS 14.1 TAX COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 14.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.4 EACH PARTY TO BEAR COSTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.5 PUBLIC DISCLOSURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.7 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.8 INTEGRATION OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.9 ENTIRE AGREEMENT/AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.10 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.11 BINDING EFFECT/ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.12 COSTS OF ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.13 PRORATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.14 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.15 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 14.16 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made and executed as of August 20, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a Delaware corporation ("Pentegra"), RONALD M. YAROS, D.D.S., P.C., a Colorado professional corporation ("Company") and RON YAROS, D.D.S., the sole shareholder of the Company (referred to herein as "Shareholder" or "Shareholders"). WITNESSETH: WHEREAS, Company operates a dental practice ("Business") and Pentegra is engaged in the business of managing certain non-dentistry aspects of dental practices; WHEREAS, the Boards of Directors of the Company and Pentegra have determined that a reorganization between each of them is in the best interests of their respective companies; WHEREAS, Pentegra or its affiliated designee has entered into or intends to enter into Agreements and Plans of Reorganization, Asset Contribution Agreements and other acquisition agreements (collectively, the "Other Agreements") with such persons or entities or the stockholders of such entities listed on EXHIBIT A (together with Company, the "Target Companies") and simultaneously with the closing of the reorganization contemplated herein, intends to consummate its initial public offering ("Initial Public Offering") of shares of its common stock, par value $.01 per share ("Pentegra Common Stock"); WHEREAS, it is intended for Federal income tax purposes that the reorganization contemplated by this Agreement shall qualify as an reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended ("IRC" or "Code"); WHEREAS, the consummation of the transfers to Pentegra pursuant to this Agreement is intended to occur in connection with, and is conditioned upon, the simultaneous consummation of the transfers contemplated by the Other Agreements and the Initial Public Offering. NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, and for other good and valuable consideration, the sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. TERMS OF THE REORGANIZATION. 1.1 THE CLOSING. The closing of the transactions contemplated hereby shall take place at 10:00 am local time, at the offices of Jackson & Walker, L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock is consummated. The date on which the Closing occurs is hereinafter referred to as the "Closing Date". 1.2 MERGER. Subject to and upon the terms and conditions contained herein, on the Closing Date, the Company shall be merged with and into Pentegra (or its designated affiliate, in which case, the references herein to Pentegra shall be to such designated affiliate and its shares of common stock) in accordance with this Agreement and the separate corporate existence of the Company shall thereupon cease ("Merger"). Pentegra shall be the surviving corporation in the Merger ("Surviving Corporation") and shall continue to be governed by the laws of the State of Delaware and the separate corporate existence of Pentegra with all rights, privileges, powers, immunities and purposes shall continue unaffected by the Merger. The Merger shall have the effects specified in the Delaware General Corporation Law and the Colorado Business Corporation Law. If all the conditions to the Merger set forth herein shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated in accordance herewith, the parties hereto shall cause to be properly executed and filed on the Closing Date Certificates of Merger for the Company meeting the applicable legal requirements. The Mergers shall become effective on the Closing Date or the filing of such documents, in accordance with applicable law, or at such later time as the parties hereto have agreed upon and designated in such merger filings. 1.3 CERTIFICATE OF INCORPORATION; BYLAWS. The Certificate of Incorporation and Bylaws of Pentegra shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation until duly amended in accordance with their terms. 1.4 DIRECTORS; OFFICERS. The persons who are directors of Pentegra immediately prior to the effective date of the Merger shall be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. The persons who are officers of Pentegra immediately prior to the effective date of the Merger shall be the officers of the Surviving Corporation and shall hold their respective offices until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal. 1.5 CONVERSION OF COMPANY COMMON STOCK. As a result of the Merger and without any action on the part of the holder thereof, all shares of the Company's common stock issued and outstanding on the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired and shall cease to exist, and each holder of a certificate of representing shares of Company common stock shall thereafter cease to have any rights with respect to such shares except the right to receive the consideration set forth on ANNEX I attached hereto (the "Merger Consideration"). Each share of common stock of the Company held in treasury at the effective date of the Merger shall cease to be outstanding and shall be cancelled and retired without payment of any consideration therefor. On the effective date of the Merger, each share of Pentegra Common Stock issued and outstanding shall, by virtue of he Mergers, and without any action on the part of the holder thereof, continue unchanged and remain outstanding as a share of validly issued, fully paid and nonassessable share of Surviving Corporation common stock. 1.6 EXCHANGE OF STOCK CERTIFICATES. On the effective date of the Merger, the Shareholders, as the holders of a certificate or certificates representing shares of Company common stock shall, upon surrender of such certificate or certificates, receive the Merger Consideration, and until the certificate or certificates of Company common stock shall have been surrendered by the Shareholder and replaced by a certificate or certificates representing Pentegra Common Stock (as set forth on ANNEX I), the certificate or certificates of Company common stock shall, for all purposes be deemed to evidence ownership of the number of shares of Pentegra Common Stock determined in accordance with the provisions of ANNEX I. All shares of Pentegra Common Stock issuable to the Shareholders in the Merger shall be deemed for all purposes to have been issued by Pentegra on the Closing Date. The Shareholders shall deliver to Pentegra at Closing the certificate or certificates representing the Company common stock owned by them, duly endorsed in blank by the Shareholders, or accompanied by duly executed blank stock powers, and with all necessary transfer tax and other revenue stamps, acquired at the Shareholder's expense, affixed and cancelled. 1.7 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in Pentegra its right, title or interest in, to or under any of the Assets or otherwise to carry out this Agreement, in return for the consideration set forth in this Agreement, the Company and Shareholders shall excecute and deliver all such deeds, bills of sale, assignments and assurances and take and do all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under the Assets in Pentegra or otherwise to carry out this Agreement. SECTION 2. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, hereby represent and warrant to Pentegra as follows: 2.1 CORPORATE EXISTENCE; GOOD STANDING. Company is a professional corporation or association, as applicable, duly organized, validly existing and in good standing under the laws of the State of Colorado. Company has all necessary corporate powers to own all of its assets and to carry on its business as such business is now being conducted. Company does not own stock in or control, directly or indirectly, any other corporation, association or business organization, nor is Company a party to any joint venture or partnership. The Shareholders are the sole shareholders of Company and own all outstanding shares of capital stock free of all security interests, claims, encumbrances and liens in the amounts set forth on EXHIBIT 2.1. Each share of Company's common stock has been legally and validly issued and fully paid and nonassessable. No shares of capital stock of Company are owned by Company in treasury. There are no outstanding (a) bonds, debentures, notes or other obligations the holders of which have the right to vote with the stockholders of Company on any matter, (b) securities of Company convertible into equity interests in Company, or (c) commitments, options, rights or warrants to issue any such equity interests in Company, to issue securities of Company convertible into such equity interests, or to redeem any securities of Company. No shares of capital stock of Company have been issued or disposed of in violation of the preemptive rights, rights of first refusal or similar rights of any of Company's stockholders. Company is not required to qualify to do business as a foreign corporation in any other state or jurisdiction by reason of its business, properties or activities in or relating to such other state or jurisdiction. Company does not have any assets, employees or offices in any state other than the state set forth in the first sentence of this SECTION 2.1. 2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Company has the corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all action required by law, its Articles or Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. Each Shareholder has the legal capacity to enter into and perform this Agreement and the other agreements to be executed and delivered in connection herewith. Company has obtained the approval of its stockholders necessary to the consummation of the transactions contemplated herein. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Company and Shareholders, as appropriate, and constitute or will constitute the legal, valid and binding obligations of Company and Shareholders, enforceable against Company and Shareholders in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, subject to the receipt of consents described on EXHIBIT 2.4, the consummation of the actions contemplated hereby will not, violate any provision of the Articles or Certificate of Incorporation or Bylaws of Company or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Company or any Shareholder is a party or by which Company or any Shareholder is bound, or violate any material restrictions of any kind to which Company is subject, or result in any lien or encumbrance on any of Company's assets or the Assets. 2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the Business or the use of the Assets, or waivers thereof, have been duly obtained and are in full force and effect and are described on EXHIBIT 2.3. There are no proceedings pending or, to the knowledge of Company and Shareholders, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent, authorization, permit, license or filing with any governmental authority, any lender, lessor, any manufacturer or supplier or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement and the agreements and documents contemplated hereby on the part of Company or Shareholders. 2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind has been declared or paid by Company on any of its capital stock since the Balance Sheet Date. No repurchase of any of Company's capital stock has been approved, effected or is pending, or is contemplated by Company. 2.6 CORPORATE RECORDS. True and correct copies of the Articles or Certificate of Incorporation, Bylaws and minutes of Company and all amendments thereto have been delivered to Pentegra. The minute books of Company contain accurate minutes of all meetings of and consents to actions taken without meetings of the Board of Directors and stockholders of Company since its formation. The books of account of Company have been kept accurately in the ordinary course of business and the revenues, expenses, assets and liabilities of Company have been properly recorded in such books. 2.7 COMPANY'S FINANCIAL INFORMATION. Company has heretofore furnished Pentegra with copies of its unaudited balance sheet and related unaudited statements of income, retained earnings and cash flows for its prior two full fiscal years, as well as copies of its unaudited balance sheet as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest date thereof shall be referred to as the "Balance Sheet Date") and any related unaudited statements of income, retained earnings, schedule of accounts receivable, accounts payable and accrued liabilities, and cash flows for the twelve months then ended (collectively, with the related notes thereto, the "Financial Statements"). The Financial Statements fairly present the financial condition and results of operations of Company as of the dates and for the periods indicated and reflect all fixed and contingent liabilities of Company. 2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases pursuant to which Company or any Shareholder leases, as lessor or lessee, real or personal property used in operating the Business, related to the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their respective terms, and there is not under any such lease any existing default by Company, as lessor or lessee, or any condition or event of which any Shareholder or Company has knowledge which with notice or lapse of time, or both, would constitute a default, in respect of which Company or Shareholders have not taken adequate steps to cure such default or to prevent a default from occurring. 2.9 CONDITION OF ASSETS. All of the Assets are in good condition and repair subject to normal wear and tear and conform with all applicable ordinances, regulations and other laws, and Company and Shareholders have no knowledge of any latent defects therein. 2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Company has good, valid and marketable title to all of the Assets, free and clear of any liens, claims, charges, exceptions or encumbrances, except for those, if any, which are set forth in EXHIBIT 2.10 attached hereto. Company shall cause all encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the Closing Date and evidence of such releases of liens and claims shall be provided to Pentegra on the Closing Date and the Assets shall not be used to satisfy such liens, claims or encumbrances. 2.11 INVENTORIES. All of the Assets constituting inventory are owned or used by Company, are in good, current, standard and merchantable condition and are not obsolete or defective. 2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT 2.12, Company has no right, title or interest in or to patents, patent rights, corporate names, assumed names, manufacturing processes, trade names, trademarks, service marks, inventions, specialized treatment protocols, copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies of Company, including the names of any entities from whom Company previously acquired significant assets. Except for off-the-shelf software licenses and except as set forth on EXHIBIT 2.12, Company is not a licensee in respect of any patents, trademarks, service marks, trade names, copyrights or applications therefor, or manufacturing processes, formulas or trade secrets or similar items and no such licenses are necessary for the conduct of the Business or the use of the Assets. No claim is pending or has been made to the effect that the Assets or the present or past operations of Company in connection with the Assets or Business infringe upon or conflict with the asserted rights of others to any patents, patent rights, manufacturing processes, trade names, trademarks, service marks, inventions, licenses, specialized treatment protocols, copyrights, formulas, know-how and trade secrets. Company has the sole and exclusive right to use all Assets constituting proprietary rights without infringing or violating the rights of any third parties and no consents of any third parties are required for the use thereof by Pentegra. 2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this Agreement of: (a) the name of each director and officer of Company and the offices held by each, (b) the most recent payroll report of Company, showing all current employees of Company and their current levels of compensation, (c) promised increases in compensation of employees of Company that have not yet been effected, (d) oral or written employment agreements, consulting agreements or independent contractor agreements (and all amendments thereto) to which Company is a party, copies of which have been delivered to Pentegra, and (e) all employee manuals, materials, policies, procedures and work-related rules, copies of which have been delivered to Pentegra. Company is in compliance with all applicable laws, rules, regulations and ordinances respecting employment and employment practices. Company has not engaged in any unfair labor practice. There are no unfair labor practices charges or complaints pending or threatened against Company, and Company has never been a party to any agreement with any union, labor organization or collective bargaining unit. 2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Company nor the Business nor any of the Assets is subject to any pending, nor does Company or any Shareholder have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Company, any Shareholder, the Business, the Assets or the transactions contemplated by this Agreement, and, to the knowledge of Company and Shareholders, no basis for any such action exists, nor is there any legal impediment of which Company or any Shareholder has knowledge to the continued operation of its business or the use of the Assets in the ordinary course, subject to consents set forth on EXHIBIT 2.4. 2.15 CONTRACTS. Company has delivered to Pentegra true copies of all written, and disclosed to Pentegra all oral, outstanding contracts, obligations and commitments of Company ("Contracts"), entered into in connection with and related to the Assets or the Business, all of which are listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than leases) attached hereto. Except as otherwise indicated on such Exhibits, all of such Contracts are valid, binding and enforceable in accordance with their terms and are in full force and effect, and no defenses, offsets or counterclaims have been asserted or may be made by any party thereto. Except as indicated on such Exhibits, there is not under any such Contract any existing default by Company or any Shareholder, or any condition or event of which Company or any Shareholder has knowledge which with notice or lapse of time, or both, would constitute a default. Company and Shareholders have no knowledge of any default by any other party to such Contracts. Company and Shareholders have not received notice of the intention of any party to any Contract to cancel or terminate any Contract and have no reason to believe that any amendment or change to any Contract is contemplated by any party thereto. Other than those contracts, obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Company are not a party to any material written or oral agreement contract, lease or arrangement, including without limitation, any: (a) Contract related to the Assets other than this Agreement; (b) Employment, consulting or compensation agreement or arrangement; (c) Labor or collective bargaining agreement; (d) Lease agreement with respect to any property, whether as lessor or lessee; (e) Deed, bill of sale or other document evidencing an interest in or agreement to purchase or sell real or personal property; (f) Contract for the purchase of materials, supplies or equipment (i) which is in excess of the requirements of the Business now booked or for normal operating inventories, or (ii) which is not terminable upon notice of thirty (30) days or less; (g) Agreement for the purchase from a supplier of all or substantially all of the requirements of the Business of a particular product or service; (h) Loan agreement or other contract for money borrowed or lent or to be borrowed or lent to another; (i) Contracts containing non-competition covenants; (j) Financial or similar contracts or agreements with patients of the Company or Shareholders, oral or written, that provide for prepayments or deferred installment payments; or (k) Other contracts or agreements that involve either an unperformed commitment in excess of $1,000 or that terminate or can only be terminated by Company on more than 30 days after the date hereof. 2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Company has not, since the Balance Sheet Date: (a) Incurred any material obligation or liability (absolute, accrued, contingent or otherwise) or entered into any contract, lease, license or commitment, except in connection with the performance of this Agreement; (b) Discharged or satisfied any material lien or encumbrance, or paid or satisfied any material obligation or liability (absolute, accrued, contingent or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business; (c) Formed or acquired or disposed of any interest in any corporation, partnership, joint venture or other entity; (d) Made any payments to or loaned any money to any person or entity other than in the ordinary course of business; (e) Lost or terminated any employee, patient, customer or supplier that has or may have, individually or in the aggregate, a material adverse effect on the Business; (f) Increased or established any reserve for taxes or any other liability on its books or otherwise provided therefor, except as may have been required due to income or operations of Company since the Balance Sheet Date; (g) Mortgaged, pledged or subjected to any lien, charge or other encumbrance any of the Assets, tangible or intangible; (h) Sold or contracted to sell or transferred or contracted to transfer any of the Assets or any other assets used in the conduct of the Business, canceled any debts or claims or waived any rights, except in the ordinary course of business; (i) Except in the ordinary course or business consistent with past practices, granted any increase in the rates of pay of employees, consultants or agents, or by means of any bonus or pension plan, contract or other commitment, increased the compensation of any officer, employee, consultant or agent; (j) Authorized or incurred any capital expenditures in excess of Five Thousand and No/100 Dollars ($5,000.00); (k) Except for this Agreement and any other agreement executed and delivered pursuant to this Agreement, entered into any material transaction other than in the ordinary course of business or permitted hereunder; (l) Redeemed, purchased, sold or issued any stock, bonds or other securities; (m) Experienced damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any of its properties, assets or business or the Business or the Assets, or experienced any other material adverse change in its financial condition, assets, prospects, liabilities or business; (n) Declared or paid a distribution, payment or dividend of any kind on the capital stock of Company; (o) Repurchased, approved any repurchase or agreed to repurchase any of Company's capital stock; or (p) Suffered any material adverse change in the Business or to the Assets. 2.17 TAXES. (a) Company has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it. All such tax returns are complete and accurate in all respects and properly reflect the relevant taxes for the periods covered thereby. Company has not received any notice that any tax deficiency or delinquency has been or may be asserted against Company. There are no audits relating to taxes of Company pending or in process or, to the knowledge of Company, threatened. Company is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. There are no liens or encumbrances relating to taxes on or threatened against any of the assets of Company. Company has withheld and paid all taxes required by law to have been withheld and paid by it. Neither Company nor any predecessor of Company is or has been a party to any tax allocation or sharing agreement or a member of an affiliated group of corporations filing a consolidated Federal income tax return. Company has delivered to Pentegra correct and complete copies of Company's three most recently filed annual state, local and Federal income tax returns, together with all examination reports and statements of deficiencies assessed against or agreed to by Company during the three calendar year period preceding the date of this Agreement. Company has neither made any payments, is obligated to make any payments, or is a party to any agreement that under any circumstance could obligate it to make any payments that will not be deductible under Code section 280G. (b) No Shareholder presently intends to dispose of any of the shares of Pentegra Common Stock to be received hereunder nor is a party to any plan, arrangement or agreement for the disposition of such shares. Company and Shareholders have no knowledge, after due inquiry, of any such intent, plan, arrangement or agreement by any Shareholder. Nothing contained herein shall prohibit Shareholders from selling such shares of Pentegra Common Stock after the designated holding period and in accordance with SECTION 12.1 hereof. 2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions or finder's or similar fees in connection with the transactions contemplated by this Agreement which may be now or hereafter asserted against Pentegra, Company or Company's shareholders resulting from any action taken by Company or any Shareholder or their respective agents or employees, or any of them. 2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against on the Balance Sheet, Company did not have, as of the Balance Sheet Date, and has not incurred since that date and will not have incurred as of the Closing Date, any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, other than those incurred in the ordinary course of business or as set forth on EXHIBIT 2.16. Company and Shareholders do not know, or have reasonable grounds to know, of any basis for the assertion against Company or any Shareholder as of the Balance Sheet Date, of any claim or liability of any nature in any amount not fully reflected or reserved against on the Balance Sheet, or of any claim or liability of any nature arising since that date other than those incurred in the ordinary course of business or contemplated by this Agreement. All indebtedness of Company (including without limitation, indebtedness for borrowed money, guaranties and capital lease obligations) is described on EXHIBIT 2.19 attached hereto. 2.20 INSURANCE POLICIES. Company, each Shareholder and each licensed professional of Company carries property, liability, malpractice, workers' compensation and such other types of insurance as is customary in the industry. Valid and enforceable policies in such amounts are outstanding and duly in force and will remain duly in force through the Closing Date. All such policies are described in EXHIBIT 2.20 attached hereto and true and correct copies have been delivered to Pentegra. Neither Shareholders nor Company have not received notice or other communication from the issuer of any such insurance policy cancelling or amending such policy or threatening to do so. Neither Company, nor any Shareholder nor any licensed professional employee of Company has any outstanding claims, settlements or premiums owed against any insurance policy. 2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached hereto, Company has neither established, nor maintains, nor is obligated to make contributions to or under or otherwise participate in, (a) any bonus or other type of compensation or employment plan, program, agreement, policy, commitment, contract or arrangement (whether or not set forth in a written document); (b) any pension, profit-sharing, retirement or other plan, program or arrangement; or (c) any other employee benefit plan, fund or program, including, but not limited to, those described in SECTION 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Company Plan," and collectively "Company Plans") have been operated and administered in all material respects in accordance with all applicable laws, rules and regulations, including without limitation, ERISA, the Internal Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, and the related rules and regulations adopted by those Federal agencies responsible for the administration of such laws. No act or failure to act by Company has resulted in a "prohibited transaction" (as defined in ERISA) with respect to the Company Plans. No "reportable event" (as defined in ERISA) has occurred with respect to any of the Company Plans. Company has not previously made, is not currently making, and is not obligated in any way to make, any contributions to any multiemployer plan within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Company Plan, either (i) the value of plan assets (including commitments under insurance contracts) is at least equal to the value of plan liabilities or (ii) the value of plan liabilities in excess of plan assets is disclosed on the Balance Sheet, all as of the Closing Date. 2.22 ADVERSE AGREEMENTS. Company is not, and will not be as of the Closing Date, a party to any agreement or instrument or subject to any charter or other corporate restriction or any judgment, order, writ, injunction, decree, rule or regulation that materially and adversely affects the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company, the Business or the Assets. 2.23 COMPLIANCE WITH LAWS IN GENERAL. Company, Shareholders and Company's licensed professional employees, and the conduct of the Business and use of the Assets, have complied with all applicable laws, rules, regulations and licensing requirements, including, without limitation, the Federal Environmental Protection Act, the Occupational Safety and Health Act, the Americans with Disabilities Act and any environmental laws and medical waste laws, and there exist no violations by Company, any Shareholder or any licensed professional employee of Company of any Federal, state or local law or regulation. Company and Shareholders have not received any notice of a violation of any Federal, state and local laws, regulations and ordinances relating to the operations of the Business and Assets and no notice of any pending inspection or violation of any such law, regulation or ordinance has been received by Company. 2.24 THIRD PARTY PAYORS. Company, Shareholders and each licensed professional employee or independent contractor of Company has timely filed all claims or other reports required to be filed with respect to the purchase of services by third-party payors, and all such claims or reports are complete and accurate, and has no liability to any payor with respect thereto. There are no pending appeals, overpayment determinations, adjustments, challenges, audit, litigation or notices of intent to open Medicare or Medicaid claim determinations or other reports required to be filed by Company, any Shareholder and each licensed professional employee of Company. Neither Company, nor any Shareholder, nor any licensed professional employee of Company has been convicted of, or pled guilty or nolo contendere to, patient abuse or negligence, or any other Medicare or Medicaid program related offense and none has committed any offense which may serve as the basis for suspension or exclusion from the Medicare and Medicaid programs or any other third party payor program. With respect to payors, Company, Shareholders and Company's licensed professional employees has not (a) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment; (b) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment; (c) failed to disclose knowledge of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with the intent to fraudulently secure such benefit or payment; and (d) violated any applicable state anti-remuneration or self-referral statutes, rules or regulations. 2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Company or Shareholders in this Agreement, and no Exhibit or certificate issued or executed by, or information furnished by, officers or directors of Company or any Shareholder and furnished or to be furnished to Pentegra pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. 2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and accurate list of all arrangements that Company has with any bank or other financial institution, indicating with respect to each relationship the type of arrangement maintained (such as checking account, borrowing arrangements, safe deposit box, etc.) and the person or persons authorized in respect thereof. 2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer, employee, director or stockholder of Company, or their respective spouses, children or affiliates, owns directly or indirectly, on an individual or joint basis, any interest in, has a compensation or other financial arrangement with, or serves as an officer or director of, any customer or supplier or competitor of Company or any organization that has a material contract or arrangement with Company. 2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of the names and addresses of each payor of Company's services which accounted for more than 10% of revenues of Company in the preceding fiscal year. Company has good relations with all such payors and other material payors of Company and none of such payors has notified Company that it intends to discontinue its relationship with Company or to deny any claims submitted to such payor for payment. SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA. Pentegra hereby represents and warrants to Company and Shareholders as follows: 3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly organized and existing and in good standing under the laws of the State of Delaware. 3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to execute, deliver and perform this Agreement and all agreements and other documents executed and delivered by it pursuant to this Agreement or to be executed and delivered on the Closing Date, and has taken all actions required by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize the execution, delivery and performance of this Agreement and such related documents. This Agreement and all agreements and documents executed and delivered in connection herewith have been, or will be as of the Closing Date, duly executed and delivered by Pentegra and constitute or will constitute the legal, valid and binding obligations of Pentegra, enforceable against Pentegra in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally or the availability of equitable remedies. The execution and delivery of this Agreement, and the agreements executed and delivered pursuant to this Agreement or to be executed and delivered on the Closing Date, do not, and, the consummation of the actions contemplated hereby will not, violate any provision of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of, or result in the acceleration of, any obligation under any mortgage, lien, lease, agreement, rent, instrument, order, arbitration award, judgment or decree to which Pentegra is a party or by which Pentegra is bound, or violate any material restrictions of any kind to which Pentegra is subject, or result in any lien or encumbrance on any of Pentegra's assets. Other than as have been obtained or as would not have a material adverse effect, there are no consents of any person or entity required for the transaction contemplated hereby on behalf of Pentegra. 3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or other permits, certificates of occupancy, concessions, grants, franchises, licenses, certificates of need and other governmental authorizations and approvals required for the conduct of the business of Penegra or waivers thereof, have been duly obtained and are in full force and effect, except as would not have a material adverse effect upon Pentegra. Other than as would not have a material adverse effect, there are no proceedings pending or, to the knowledge of Pentegra, threatened, which may result in the revocation, cancellation or suspension, or any adverse modification, of any such licenses or permits. 3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse effect, neither Pentegra nor its business or assets is subject to any pending, nor does Pentegra have knowledge of any threatened, litigation, governmental investigation, condemnation or other proceeding against or relating to or affecting Pentegra, its business, assets or the transactions contemplated by this Agreement, and, to the knowledge of Pentegra, no basis for any such action exists, nor is there any legal impediment of which Pentegra has knowledge to the continued operation of its business or the use of its Assets in the ordinary course. 3.5 TAXES. Pentegra has filed all tax returns (including tax reports and other statements) required to have been filed by it, and has paid all taxes (including any interest, penalty or additions thereto) required to have been paid by it, other than as would not have a material adverse effect. Pentegra has not received any notice that any tax deficiency or delinquency has been or may be asserted against Pentegra. There are no audits relating to taxes of Pentegra pending or in process or, to the knowledge of Pentegra, threatened. Pentegra is not currently the beneficiary of any waiver of any statute of limitations in respect of taxes nor of any extension of time within which to file any tax return or to pay any tax assessment or deficiency. 3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for any finder's, broker's or similar fees in connection with the transactions contemplated hereby. 3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of Pentegra Common Stock in connection with the reorganization contemplated hereby will be as of the Closing Date duly and validly authorized by all necessary corporate action on the part of Pentegra. The Pentegra Common Stock to be issued in connection with the reorganization contemplated hereby, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable. 3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra in this Agreement, and no Exhibit or certificate issued by officers or directors of Pentegra and furnished or to be furnished to Company or any Shareholder pursuant hereto, or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained therein not misleading. SECTION 4. COVENANTS OF COMPANY AND SHAREHOLDERS. Company and Shareholders, jointly and severally, agree that between the date hereof and the Closing Date: 4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Company and Shareholders shall use their best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and conditions. Company and Shareholders agree to complete the Exhibits hereto to be provided by them in form and substance satisfactory to Pentegra. 4.2 BUSINESS OPERATIONS. Company and Shareholders shall operate the Business and use the Assets in the ordinary course. Company and Shareholders shall not enter into any lease, contract, indebtedness, commitment, purchase or sale or acquire or dispose of any capital asset relating to the Business or the Assets except in the ordinary course of business. Company and Shareholders shall use their best efforts to preserve the Business and Assets intact and shall not take any action that would have an adverse effect on the Business or Assets. Company and Shareholders shall use their best efforts to preserve intact the relationships with payors, customers, suppliers, patients and others having significant business relations with Company. Company and Shareholders shall collect its receivables and pay its trade payables in the ordinary course of business. Company and Shareholdes shall not introduce any new method of management, operations or accounting. 4.3 ACCESS AND NOTICE. Company and Shareholders shall permit Pentegra and its authorized representatives access to, and make available for inspection, all of the assets and business of Company, the Business and the Assets, including employees, customers and suppliers and permit Pentegra and its authorized representatives to inspect and make copies of all documents, records and information with respect to the business or assets of Company, the Business or the Assets as Pentegra or its representatives may request. Company and Shareholders shall promptly notify Pentegra in writing of (a) any notice or communication relating to a default or event that, with notice or lapse of time or both, could become a default, under any contract, commitment or obligation to which Company is a party or relating to the Business or the Assets, and (b) any adverse change in Company's or the Business' financial condition or the Assets. 4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Company and Shareholders shall use their best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby, including consents described on EXHIBIT 2.4. Company and Shareholders shall use their best efforts to obtain all licenses, permits, approvals or other authorizations required under any law, rule, regulation, or otherwise to provide the services of the Practice contemplated by the Service Agreement and to conduct the intended business of the Practice and operate the Business and use the Assets. 4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the earlier of Closing or the termination of this Agreement in accordance with the provisions hereof, Company and Shareholders shall not, and shall use its best efforts to cause Company's employees, agents and representatives not to, initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer, including without limitation, any proposal or offer to any Shareholder, with respect to a merger, acquisition, consolidation or similar transaction involving, or the purchase of all or any significant portion of the assets or any equity securities of Company or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to such proposal or offer, and Company and Shareholders will immediately cease any such activities, discussions or negotiations heretofore conducted with respect to any of the foregoing. Company and Shareholders shall immediately notify Pentegra if any such inquiries or proposals are received. 4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Company hereby covenants and agrees that it will take whatever steps are necessary to pay or fund completely for any accrued benefits, where applicable, or vested accrued benefits for which Company or any entity might have any liability whatsoever arising from any insurance, pension plan, employment tax or similar liability of Company to any employee or other person or entity (including, without limitation, any Company Plan and any liability under employment contracts with Company) allocable to services performed prior to the Closing Date. Company and Shareholders acknowledge that the purpose and intent of this covenant is to assure that Pentegra shall have no unfunded liability whatsoever at any time after the Closing Date with respect to any of Company's employees or similar persons or entities, including, without limitation, any Company Plan for the period prior to the Closing Date. 4.7 EMPLOYEE MATTERS. Company shall not, without the prior written approval of Pentegra, except as required by law, increase the cash compensation of any Shareholder (other than in the ordinary course of business) or other employee or an independent contractor of Company, adopt, amend or terminate any compensation plan, employment agreement, independent contractor agreement, employee policies and procedures or employee benefit plan, take any action that could deplete the assets of any employee benefit, or fail to pay any premium or contribution due or file any report with respect to any employee benefit plan, or take any other actions with respect to its employees or employee matters which might have an adverse effect upon Company, its business, assets or prospects. 4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any kind will be declared or paid by Company, nor will any repurchase of any of Company's capital stock be approved or effected. 4.9 REQUIREMENTS TO EFFECT REORGANIZATION. Company and Shareholders shall use their best efforts to take, or cause to be taken, all actions necessary to effect the reorganization contemplated hereby under applicable law. 4.10 ACCOUNTING AND TAX MATTERS. Company and Shareholders will not change in any material respect the tax or financial accounting methods or practices followed by Company (including any material change in any assumption underlying, or any method of calculating, any bad debt, contingency or other reserve), except as may be required by law or generally accepted accounting principles. Company and Shareholders will duly, accurately and timely (without regard to any extensions of time) file all returns, information statements and other documents relating to taxes of Company required to be filed by it, and pay all taxes required to be paid by it, on or before the Closing Date. 4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Shareholders and Company hereby waive any compliance with the applicable state Bulk Transfers Act, if any. Company and Shareholders covenant and agree that all of the creditors with respect to the Business and the Assets will be paid in full by Company prior to the Closing Date, except to extent that any liability to such creditors is assumed by Pentegra pursuant to this Agreement. If required by Pentegra, Company and Shareholders shall furnish Pentegra with proof of payment of all creditors with respect to the Business and the Assets. Notwithstanding the foregoing, Company and Shareholders may dispute the validity or amount of any such creditor's claim without being deemed to be in violation of this SECTION 4.11, provided that such dispute is in good faith and does not unreasonably delay the resolution of the claim and provided, further that Company and Shareholders agree to indemnify and bond Pentegra for such amounts as is satisfactory to Pentegra. 4.12 LEASE. If Company leases any of its premises from any Shareholder or other affiliate of Company or any shareholder of Company, Pentegra shall have entered into a building lease (the "Building Lease") with the owner of such premises on terms and conditions satisfactory to Pentegra, the terms and conditions of which shall include, without limitation, (i) a five year initial term plus three five-year renewal options, (ii) a lease rate equal to the fair market value lease rate, as agreed to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra. 4.13 HIRING OF EMPLOYEES. Company and Shareholders shall cooperate with all requests made by Pentegra for the purpose of allowing Pentegra to hire those non-dentist employees of Company designated by Pentegra, such employment to be effective as of the Closing Date. Notwithstanding the above, Company and Shareholders shall remain liable under any Company Plans for any claims incurred by any employees or their spouses or dependents, and for all compensation, bonuses, benefits and other such items and other liabilities related to Company's employees incurred by Company prior to the Closing Date. 4.14 EMPLOYEE BENEFIT PLANS. Company agrees and acknowledges that all employees of Company hired by Pentegra pursuant to SECTION 4.13 above, shall be treated as "leased employees" (as defined in Code Section 414(n)) of Company and shall be treated as Clinic employees for purposes of eligibility and participation in Company Plans. 4.15 INSURANCE. Company shall cause Pentegra and its affiliates to be named as an additional insured on its liability insurance programs, effective as of the Closing Date. 4.16 [INTENTIONALLY DELETED] 4.17 [INTENTIONALLY DELETED] 4.18 [INTENTIONALLY DELETED] 4.19 [INTENTIONALLY DELETED] 4.20 [INTENTIONALLY DELETED] SECTION 5. COVENANTS OF PENTEGRA. Pentegra agrees that between the date hereof and the Closing: 5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best efforts to cause the consummation of the transactions contemplated hereby in accordance with their terms and provisions. Pentegra agrees to complete the Exhibits hereto to be provided by it. 5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall use its best efforts to secure all necessary approvals and consents of third parties to the consummation of the transactions contemplated hereby. SECTION 6. COVENANTS OF PENTEGRA AND COMPANY AND SHAREHOLDERS. Pentegra, Shareholders and Company agree as follows: 6.1 FILINGS; OTHER ACTIONS. Pentegra, Company and Shareholders shall cooperate to promptly prepare and file with the Securities Exchange Commission ("SEC") the Registration Statement on Form S-1 (or other appropriate Form) to be filed by Pentegra in connection with its Initial Public Offering (including the prospectus constituting a part thereof, the "Registration Statement"). Pentegra shall obtain all necessary state securities laws or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement and the Company and Shareholders shall furnish all information concerning Company and Shareholders as may be reasonable requested in connection with any such action. Company and Shareholder represent and warrant that none of the information or documents supplied or to be supplied by it specifically for inclusion in the Registration Statement, by exhibit or otherwise, will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act of 1933, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Company and Shareholders shall be entitled to review the Registration Statement and each amendment thereto, if any, prior to the time each becomes effective under the Securities Act of 1933. Company and Shareholders shall furnish Pentegra will all information concerning themselves, their subsidiaries, if any, directors, officers and stockholders and such other matters as may be reasonable requested by Pentegra in connection with the preparation of the Registration Statement and each amendment or supplement thereto, or any other statement, filing, notice or application made by or on behalf of each such party or any of its subsidiaries to any governmental entity in connection with the transactions contemplated by the Other Agreements or this Agreement. SECTION 7. PENTEGRA CONDITIONS PRECEDENT. The obligations of Pentegra hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Company and Shareholders contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 7.2 COVENANTS AND CONDITIONS. Company and Shareholders shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Company and Shareholders prior to the Closing Date. 7.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition (financial or otherwise), operations, assets, liabilities, business or prospects of Company shall have occurred since the Balance Sheet Date. 7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have completed a due diligence review of the business, operations and financial statements of Company, the Business and the Assets, the results of which shall be satisfactory to Pentegra in its sole discretion. 7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the transactions contemplated hereby shall have been approved by the Board of Directors of Pentegra or a committee thereof. 7.7 [INTENTIONALLY DELETED] 7.8 [INTENTIONALLY DELETED] 7.9 CONSENTS AND APPROVALS. Company and Shareholders shall have obtained all necessary government and other third-party approvals and consents. 7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly executed in form satisfactory to Pentegra and its counsel, referred to in SECTION 9.1. 7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or payables betwene Company and its shareholders or affiliates and Company shall not have any liabilities, including indebtedness, guaranties and capital leases, that are not set forth on EXHIBIT 2.19. 7.12 INSURANCE. Company and Shareholders shall have named Pentegra as an additional insured on their liability insurance program in accordance with SECTION 4.15. 7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material change in the working capital of Company since the Balance Sheet Date. 7.14 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 8. COMPANY'S AND SHAREHOLDERS' CONDITIONS PRECEDENT. The obligations of Company and Shareholders hereunder are subject to fulfillment at or prior to the Closing of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Pentegra contained herein shall have been true and correct in all respects when initially made and shall be true and correct in all respects as of the Closing Date. 8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by Pentegra prior to the Closing Date. 8.3 PROCEEDINGS. No action, proceeding or order by any court or governmental body shall have been threatened orally or in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated hereby. 8.4 CLOSING DELIVERIES. Company shall have received all documents, duly executed in form satisfactory to Company and its counsel, referred to in SECTION 9.2. 8.5 SECURITIES APPROVAL. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. At or prior to the date that the Registration Statement is declared effective by the SEC, Pentegra shall have received all state securities and "Blue Sky" permits necessary to consummate the transactions contemplated hereby. The Pentegra Common Stock shall have been approved for listing on Nasdaq or other exchange selected by Pentegra, subject only to official notification of issuance. SECTION 9. CLOSING DELIVERIES. 9.1 DELIVERIES OF COMPANY AND SHAREHOLDERS. Within five business days after requested by Pentegra, Company and Shareholders shall deliver to Pentegra the following, all of which shall be in a form satisfactory to counsel to Pentegra and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) [intentionally deleted]; (b) [intentionally deleted]; (c) a copy of the resolutions of the Board of Directors of Company authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (d) executed merger certificate and/or plan as required by applicable state law; (e) an assignment of each contract, agreement and lease being assigned to and assumed by Pentegra and the original stock certificates together with blank stock powers representing the outstanding shares of Company common stock; (f) certificates of the Shareholders and a duly authorized officer of Company dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Company and Shareholder contained herein; (ii) as to the performance of and compliance by Company and Shareholder with all covenants contained herein; and (iii) certifying that all conditions precedent of Company and Shareholders to the Closing have been satisfied; (g) a certificate of the Secretary of Company certifying as to the incumbency of the directors and officers of Company and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Company; (h) a certificate, dated within 30 days of the Closing Date, of the Secretary of the State of incorporation of Company and any state of required foreign qualification of Company establishing that Company is in existence and is in good standing to transact business in its state of incorporation; (i) an opinion of counsel to Company and Shareholder opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Company, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Pentegra; (j) non-foreign affidavits executed by Company; (k) all authorizations, consents, approvals, permits and licenses referred to in SECTIONS 2.3 and 2.4; (l) an executed Registration Rights Agreement between Pentegra and Company, in substantially the form attached hereto as EXHIBIT 9.1(l) (the "Registration Rights Agreement"); and (m) such other instruments and documents as reasonably requested by Pentegra to carry out and effect the purpose and intent of this Agreement and any other instruments and agreements reasonably requested by Pentegra in connection with any service arrangements to be provided by Pentegra to Shareholder. 9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall deliver to Company and Shareholders, the following, all of which shall be in a form satisfactory to counsel to Company and Shareholders and shall be held by Jackson & Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter agreement in form and substance mutually acceptable to the parties hereto: (a) the Merger Consideration; (b) [intentionally deleted]; (c) an assumption of each contract, agreement and lease being assigned to and assumed by Pentegra; (d) a copy of the resolutions of the Board of Directors of Pentegra (or a committee thereof) authorizing the execution, delivery and performance of this Agreement and all related documents and agreements each certified by the Secretary as being true and correct copies of the original thereof; (e) certificates of the President of Pentegra, dated as of the Closing Date, (i) as to the truth and correctness of the representations and warranties of Pentegra contained herein; (ii) as to the performance of and compliance by Pentegra with all covenants contained herein; and (iii) certifying that all conditions precedent of Pentegra to the Closing have been satisfied; (f) a certificate of the Secretary of Pentegra certifying as to the incumbency of the directors and officers of Pentegra and as to the signatures of such directors and officers who have executed documents delivered at the Closing on behalf of Pentegra; (g) certificates, dated within 30 days of the Closing Date, of the Secretary of the State of Delaware establishing that Pentegra is in existence and are in good standing to transact business in the State of Delaware and the State of incorporation of Company; (h) an opinion of counsel to Pentegra opining as to the execution and delivery of this Agreement and the other documents and agreements to be executed pursuant hereto, the good standing and authority of Pentegra, the enforceability of this Agreement and the other agreements and documents to be executed in connection herewith, and other matters reasonably requested by Company; (i) the executed Registration Rights Agreement; and (j) such other instruments and documents as reasonably requested by Company to carry out and effect the purpose and intent of this Agreement. SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in any Exhibit attached hereto, any agreement executed pursuant hereto, and any certificate executed and delivered by any party pursuant to the terms of this Agreement, shall constitute representations and warranties of Company and Shareholders, jointly and severally, or of Pentegra, as the case may be. All such representations and warranties, and all representations and warranties expressly labeled as such in this Agreement shall survive the date of this Agreement and the Closing Date for a period of five (5) years following the Closing Date, except that (i) the representations and warranties with respect to environmental and medical waste laws and health care laws and matters shall survive for a period of fifteen (15) years and tax representations shall survive until one year after the expiration of the applicable statute of limitations. Each party covenants with the other parties not to make any claim with respect to such representations and warranties, against any party after the date on which such survival period shall terminate. No party shall be entitled to claim indemnity from any other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party hereby releases, acquits and discharges the other party from any and all claims and demands, actions and causes of action, damages, costs, expenses and rights of setoff with respect to which the notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely provided. 10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY AND HOLD COMPANY AND ITS SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING COMPANY AND SHAREHOLDERS, FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, AND (B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND (C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.3 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. SHAREHOLDERS AND, PRIOR TO THE EFFECTIVE DATE OF THE MERGER, COMPANY (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO: (A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY INDEMNITOR HEREUNDER, (B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, (C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT COMPANY'S BUSINESS WHETHER ON OR AFTER THE CLOSING DATE, (D) ANY VIOLATION BY COMPANY OR ITS SHAREHOLDERS OR THEIR CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE COMPANY OR ITS SHAREHOLDERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR AFTER THE CLOSING DATE, (E) TAXES OF COMPANY OR ANY SHAREHOLDER OR ANY OTHER PERSON OR ENTITY RELATED TO OR AFFILIATED WITH THE COMPANY OR SHAREHOLDER ARISING FROM OR AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (F) ANY LIABILITY OF COMPANY OR THE SHAREHOLDERS FOR COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH, (G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES, (H) ANY EXCLUDED LIABILITIES (SET FORTH ON EXHIBIT 4.16), OR (I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS AND PROVIDED TO PENTEGRA OR ITS COUNSEL BY THE COMPANY OR ITS SHAREHOLDERS SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO COMPANY OR ITS SHAREHOLDERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING. IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER. 10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified Person receives written notice of the commencement of any action or other proceeding in respect of which indemnification or reimbursement may be sought hereunder, or within such lesser time as may be provided by law for the defense of such action or proceeding, such Indemnified Person shall notify Indemnitor thereof. If any such action or other proceeding shall be brought against any Indemnified Person, Indemnitor shall, upon written notice given within a reasonable time following receipt by Indemnitor of such notice from Indemnified Person, be entitled to assume the defense of such action or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person; provided, however, that any Indemnified Person may at its own expense retain separate counsel to participate in such defense. Notwithstanding the foregoing, Indemnified Person shall have the right to employ separate counsel at Indemnitor's expense and to control its own defense of such action or proceeding if, in the reasonable opinion of counsel to such Indemnified Person, (a) there are or may be legal defenses available to such Indemnified Person or to other Indemnified Persons that are different from or additional to those available to Indemnitor and which could not be adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor and such Indemnified Person that would make such separate representation advisable; provided, however, that in no event shall Indemnitor be required to pay fees and expenses hereunder for more than one firm of attorneys of Indemnified Person in any jurisdiction in any one action or proceeding or group of related actions or proceedings. Indemnitor shall not, without the prior written consent of any Indemnified Person, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding to which such Indemnified Person is a party unless such settlement, compromise or consent includes an unconditional release of such Indemnified Person from all liability arising or potentially arising from or by reason of such claim, action or proceeding. 10.5 RIGHT OF SETOFF. In the event of any breach of warranty, representation, covenant or agreement by Company or any Shareholder giving rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset the amount of damages incurred by it as a result of such breach of warranty, representation, covenant or agreement against any amounts payable by Pentegra hereunder or under any other agreements executed between Pentegra and Shareholder. SECTION 11. TERMINATION. This Agreement may be terminated: (a) at any time by mutual agreement of all parties; (b) at any time by Pentegra if any representation or warranty of Company or any Shareholder contained in this Agreement or in any certificate or other document executed and delivered by Company or any Shareholder pursuant to this Agreement is or becomes untrue or breached in any material respect or if Company or any Shareholder fails to comply in any material respect with any covenant or agreement contained herein, and any such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (c) at any time by Company or any Shareholder if any representation or warranty of Pentegra contained in this Agreement or in any certificate or other document executed and delivered by Pentegra pursuant to this Agreement is or becomes untrue or breached in any material respect or if Pentegra fails to comply in any material respect with any covenant or agreement contained herein and such misrepresentation, noncompliance or breach is not cured, waived or eliminated within twenty (20) days after receipt of written notice thereof; (d) by Pentegra, Shareholders or Company if the transaction contemplated hereby shall not have been consummated by December 31, 1997; or (e) by Pentegra at any time prior to the Closing Date if Pentegra determines in its sole discretion as the result of its legal, financial and operational due diligence with respect to Company, that such termination is desirable and in the best interests of Pentegra. SECTION 12. TRANSFER REPRESENTATIONS. 12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date, Shareholder shall not voluntarily (a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra Common Stock received by such party hereunder, (ii) any interest (including without limitation, an option to buy or sell) in any shares of Pentegra Common Stock, in whole or in part, and no such attempted transfer shall be treated as effective for any purpose or (b) engage in any transaction, whether or not with respect to any shares of Pentegra Common Stock or any interest therein, the intent or effect of which is to reduce the risk of owning shares of Pentegra Common Stock. The certificates evidencing the Pentegra Common Stock delivered to Company pursuant to the terms hereof will bear a legend substantially in the form set forth below and containing such other information as Pentegra may deem necessary or appropriate: The shares represented by this certificate may not be voluntarily sold, assigned, exchanged, transferred, encumbered, pledged, distributed, appointed or otherwise disposed of, and the issuer shall not be required to give effect to any attempted voluntary sale, assignment, exchange, transfer, encumbrance, pledge, distribution, appointment or other disposition prior to _________ [date that is one year from the Closing Date]. Upon the written request of the holder of this certificate, the issuer agrees to remove this restrictive legend (and any stop order placed with the transfer agent) after the date specified above. 12.2 INVESTMENTS; COMPLIANCE WITH LAW. Shareholders acknowledge that the shares of Pentegra Common Stock to be delivered to Company pursuant to this Agreement have not been and will not be registered under the Securities Act of 1933 and may not be resold without compliance with the Securities Act of 1933. The Pentegra Common Stock to be acquired by Shareholders pursuant to this Agreement is being acquired solely for its own account, for investment purposes only and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. Each Shareholder covenants, warrants and represents that none of the shares of Pentegra Common Stock issued to it will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the Securities Act, as amended, and the rules and regulations of the Securities Exchange Commission and applicable state securities laws and regulations. All certificates evidencing shares of Pentegra Common Stock shall bear the following legend in addition to the legend referenced in SECTION 12.1. The shares represented hereby have not been registered under the Securities Act of 1933 (the "Act") and may only be sold or otherwise transferred if the holder hereof complies with the Act and applicable securities laws. In addition, certificates evidencing shares of Pentegra Common Stock shall bear any legend required by the securities or blue sky laws of any state where Company resides. 12.3 ECONOMIC RISK; SOPHISTICATION. Shareholders are able to bear the economic risk of an investment in Pentegra Common Stock acquired pursuant to this Agreement and can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment and therefore have the capacity to protect their own interests in connection with the acquisition of the Pentegra Common Stock. Shareholders and their representatives have had an adequate opportunity to ask questions and receive answers from the officers of Pentegra concerning any and all matters relating to the background and experience of the officers and directors of Pentegra, the plans for the operations of the business of Pentegra, and any plans for additional acquisitions and the like. Shareholders and their representatives have asked any and all questions in the nature described in the preceding sentence and all questions have been answered to their satisfaction. Shareholders are "accredited investors" as defined in Regulation D of the Securities Act of 1933, as amended. SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Company and Shareholders recognize and acknowledge that they had in the past, currently have, and in the future may possibly have, access to certain confidential information of Pentegra that is valuable, special and unique assets of Pentegra's businesses. Company and Shareholders agree that it will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, unless (i) such information becomes available to or known by the public generally through no fault of Company or Shareholders, (ii) disclosure is required by law or the order of any governmental authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), Company and Shareholders shall, if possible, give prior written notice thereof to the other parties hereto, and provide such other parties hereto with the opportunity to contest such disclosure, (iii) Company and Shareholders reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the disclosing party, or (iv) Company and Shareholders are the sole and exclusive owner of such confidential information as a result of the transactions contemplated hereunder or otherwise. In the event of a breach or threatened breach by Company or Shareholders of the provisions of this SECTION 13, Pentegra shall be entitled to an injunction restraining Company and Shareholders from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting Pentegra from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. The obligations of the parties under this SECTION 13 shall survive the termination of this Agreement. SECTION 14. MISCELLANEOUS. 14.1 TAX COVENANT. The parties intend that the transactions contemplated by this Agreement will qualify as a reorganization within the meaning of Section 368(a) of the Code. The tax returns (and schedules thereto) of Shareholders, Company and Pentegra shall be filed in a manner consistent with such intention and Shareholders and Pentegra shall each provide the other with such tax information, reports, returns or schedules as may be reasonably required to assist the other in so reporting the transactions contemplated hereby. 14.2 NOTICES. Any communications required or desired to be given hereunder shall be deemed to have been properly given if sent by hand delivery, or by facsimile AND overnight courier, to the parties hereto at the following addresses, or at such other address as either party may advise the other in writing from time to time: If to Pentegra: Pentegra Dental Group, Inc. 2999 N. 44th Street, Suite 650 Phoenix, Arizona 85018 Attn: President Facsimile: (602) 952-0554 with a copy of each notice directed to Pentegra to: James S. Ryan, III, Esquire Jackson & Walker, L.L.P. 901 Main Street Dallas, Texas 75202 Facsimile: (214) 953-5822 If to Company and Shareholders: To address set forth on EXHIBIT 14.2 with a copy to: Person and address set forth on EXHIBIT 14.2 All such communications shall be deemed to have been delivered on the date of hand delivery or on the next business day following the deposit of such communications, properly addressed and postage prepaid with the overnight courier. 14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further acts and to execute and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the parties to this Agreement shall pay all of the costs and expenses incurred by such party in connection with the transactions contemplated by this Agreement, whether or not such transactions are consummated. Without limiting the generality of the foregoing and whether or not such liabilities may be deemed to have been incurred in the ordinary course of business, Pentegra shall not be liable to or required to pay, either directly or indirectly, any fees and expenses of legal counsel, accountants, auditors or other persons or entities retained by Company or any Shareholder for services rendered in connection with negotiating and closing the transactions contemplated by this Agreement or the documents to be executed in connection herewith, whether or not such costs or expenses are incurred before or after the Closing Date. 14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its terms confidential, and shall make no press release or public disclosure, either written or oral, regarding the transactions contemplated by this Agreement without the prior written consent of the other party, provided that the foregoing shall not prohibit any disclosure (a) by press release, filing or otherwise that Pentegra has determined in good faith judgment to be required by Federal securities laws or the rules of the National Association of Securities Dealers, (b) to attorneys, accountants, investment bankers or other agents of the parties assisting the parties in connection with the transactions contemplated by this Agreement, and (c) by Pentegra in connection with the conduct of its Initial Public Offering and conducting an examination of the operations and assets of Company. 14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Company AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES. 14.7 CAPTIONS. The captions or headings in this Agreement are made for convenience and general reference only and shall not be construed to describe, define or limit the scope or intent of the provisions of this Agreement. 14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes and not only in connection with the specific representation in which they are explicitly referenced. 14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY. 14.10 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts shall together constitute and be one and the same instrument 14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on, and shall inure to the benefit of, the parties hereto, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No party may assign any right or obligation hereunder without the prior written consent of the other parties; provided, however, that Pentegra may assign its rights and delegate its obligations hereunder to any entity that is an affiliate of Pentegra. For purposes of this Agreement an "affiliate" of Pentegra shall include any entity that, through one or more intermediaries is, controlled, controlled by or under common control with, Pentegra. Upon any such assignment prior to the Closing, all references herein to Pentegra (including those to Pentegra Common Stock) shall be deemed to include references to the assignee and the assignee's common stock. Notwithstanding any such assignment, Pentegra shall not, absent a written release from Company, be relieved from its obligations to Company under this Agreement. 14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand, or Company, on the other hand, file suit in any court against any other party to enforce the terms of this Agreement against the other party or to obtain performance by it hereunder, the prevailing party will be entitled to recover all reasonable costs, including reasonable attorneys' fees, from the other party as part of any judgment in such suit. The term "prevailing party" shall mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the Complaint. "Reasonable attorneys' fees" are those reasonable attorneys' fees actually incurred in obtaining a judgment in favor of the prevailing party. 14.13 PRORATIONS. Company agrees to reimburse Pentegra at Closing a pro rata portion of all taxes levied upon the Assets for the calendar year in which the Closing occurs. Such taxes shall be estimated, apportioned and pro-rated among Company and Pentegra as of the Closing Date, and the prorated amount due Pentegra shall be credited to the cash portion of the Purchase Consideration. Upon payment by Pentegra of such taxes actually assessed and paid on the Assets, Pentegra shall calculate the apportionment of such taxes and shall pay Company or may demand from Company, and Company agrees to pay, the amount necessary to correct the estimate and proration made at Closing. 14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by all the parties hereto. Any waiver of the terms and conditions hereof must be in writing, and signed by the parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any other terms and conditions hereof. 14.15 ARBITRATION. Upon the request of either Pentegra or the Companys or Shareholders (hereinafter referred to as a "Party"), whether made before or after the institution of any legal proceeding, any dispute among the parties hereto in any way arising out of, related to, or in connection with this Agreement (hereinafter a "Dispute"), shall be resolved by binding arbitration in accordance with the terms of this Section (hereinafter the "Arbitration Program"). All Disputes between the Parties shall be resolved by binding arbitration administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Arbitration Program, the Commercial Arbitration Rules of the AAA. In the event of any inconsistency between this Arbitration Program and those rules or statutes, then the terms of this Arbitration Program shall control. The parties hereto agree to adhere to all warranties and covenants (as described herein) until such time as the arbitration process has been completed and the arbitrators have determined each party's post-arbitration obligations and responsibilities as it relates to such warranties and covenants. No provision of, nor the exercise of any rights under, this Arbitration Program shall limit the right of any Party at any time to seek or use ancillary or preliminary judicial or non-judicial self help remedies for the purposes of obtaining, perfecting, preserving, or foreclosing upon any personal property in which there has been granted a security interest or lien by a Party in the Documents. In Disputes involving indebtedness or other monetary obligations, each Party agrees that the other Party may proceed against all liable persons, jointly and severally against one or more of them, without impairing rights against other liable persons. Nor shall a Party be required to join the principal obligor or any other liable persons (e.g., sureties or guarantors) in any proceeding against a particular person. A Party may release or settle with one or more liable persons as the Party deems fit without releasing or impairing rights to proceed against any persons not so released. All statutes of limitation that would otherwise be applicable shall apply to any arbitration proceeding. The party seeking arbitration shall notify the other Party, in writing, of that Party's desire to arbitrate a dispute; and each Party shall, within twenty (20) days from the date such notification is received, select an arbitrator, and those two arbitrators shall select a third arbitrator within ten (10) days thereafter. The issues or claims in dispute shall be committed to writing, separately stated and numbered, and each party's proposed answers or contentions shall be signed below the questions. Failure by a party to select an arbitrator within the prescribed time period shall serve as that Party's acquiescence and acceptance of the other party's selection of arbitrator. The arbitrators shall resolve all Disputes in accordance with the applicable substantive law. Any Dispute shall be decided by a majority vote of three arbitrators, unless the claim or amount in controversy does not exceed $100,000.00, in which case a single arbitrator (who shall have authority to render a maximum award of $100,000.00, including all damages of any kind, costs and fees) may decide the Dispute. The arbitrators may grant any remedy or relief that the arbitrators deem just and equitable and within the scope of this Arbitration Program. The arbitrators may also grant such ancillary relief as is necessary to make effective the award. In all arbitration proceedings the arbitrators shall make specific and written findings of fact and conclusions of law. In all arbitration proceedings in which the amount in controversy exceeds $100,000.00, in the aggregate, the Parties shall have in addition to the statutory right to seek vacation or modification of any award pursuant to applicable law, the right to seek vacation or modification of any award that is based in whole, or in part, on an incorrect or erroneous ruling of law by appeal to an appropriate court having jurisdiction; provided, however, that any such application for vacation or modification of an award based on an incorrect ruling of law must be filed in a court having jurisdiction over the Dispute within 15 days from the date the award in rendered. The arbitrators' findings of fact shall be binding on all Parties and shall not be subject to further review except as otherwise allowed by applicable law. To the maximum extent practicable, an arbitration proceeding hereunder shall be concluded within 180 days of the filing of the Dispute with AAA. Arbitration proceedings hereunder shall be conducted where agreed to in writing by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this Arbitration Program shall survive any termination, amendment, or expiration of the Documents, unless the Parties otherwise expressly agree in writing making specific reference to this Arbitration Program. To the extent permitted by applicable law, the arbitrator shall have the power to award recovery of all costs and fees (including attorney's fees, administrative fees, and arbitrators' fees) to the prevailing Party. This Arbitration Program may be amended, changed, or modified only by a writing which specifically refers to this Arbitration Program and which is signed by all the Parties. If any term, covenant, condition or provision of the Arbitration Program is found to be unlawful or invalid or unenforceable, such illegality or invalidity or unenforceable shall not affect the legality, validity or enforceability of the remaining parts of this Arbitration Program, and all such remaining parts hereof shall be valid and enforceable and have full force and effect as if the illegal, invalid or unenforceable part had not been included. Each Party agrees to keep all Disputes and arbitration proceedings strictly confidential, except for disclosures of information required in the ordinary course of business of the Parties or by applicable law or regulation. 14.16 SEVERABILITY. If any provision of this Agreement shall be found to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and this Agreement shall be construed and enforced as if such provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect. In lieu of such provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such provision as may be possible and be legal, valid and enforceable. [End of Page] IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. RONALD M. YAROS, D.D.S., P.C. By: /s/ Ronald M. Yaros, D.D.S. ------------------------------------ Its: President ----------------------------------- PENTEGRA DENTAL GROUP, INC. By: /s/ Kim Rozman ------------------------------------ Its: Senior Vice President ----------------------------------- /s/ Ronald M. Yaros, DDS ---------------------------------------- Ronald M. Yaros, DDS INDEX TO EXHIBITS Exhibit Description ------- ----------- Annex I Merger Consideration A Target Companies 2.1 Corporate Existence; Good Standing; Shareholders/Ownership 2.3 Permits and Licenses 2.4 Consents 2.8 Leases 2.10 Real and Personal Property; Encumbrances 2.12 Patents and Trademarks; Names 2.13 Directors and Officers; Payroll Information; Employment Agreements 2.15 Contracts (other than Leases and Employment Agreements) 2.16 Subsequent Events 2.19 Debt 2.20 Insurance Policies 2.21 Employee Benefit Plans 2.26 Banking Relations 2.28 Payors 4.16 Excluded Assets and Excluded Liabilities 9.1(l) Form of Registration Rights Agreement 14.2 Addresses for Notice EX-4.1 53 EXHIBIT 4.1 ---------------- ------------------- NUMBER SHARES PEN P E N T E G R A ---------------- PENTEGRA DENTAL GROUP, INC. ------------------- COMMON STOCK INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE PAR VALUE $.001 PER SHARE CUSIP 709637 10 2 SEE REVERSE FOR CERTAIN DEFINITIONS AND LEGENDS This Certifies that is the owner of FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $.001 PER SHARE, OF PENTEGRA DENTAL GROUP, INC. (hereinafter referred to as the "Corporation"), transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued under and shall be held subject to the provisions of the State of Delaware and all of the provisions of the Restated Certificate of Incorporation and Bylaws of the Corporation and any amendments thereto (copies of which are on file at the office of the Corporation), to all of which the holder, by acceptance hereof, assents. This certificate is not valid until countersigned and registered by the Transfer Agent and Registrar. Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated: COUNTERSIGNED AND REGISTERED: CONTINENTAL STOCK TRANSFER & TRUST COMPANY (Jersey City, NJ) [SEAL] TRANSFER AGENT AND REGISTRAR /s/ Gary S. Glatter /s/ Kim Rozman BY PRESIDENT AND CHIEF EXECUTIVE OFFICER SECRETARY AUTHORIZED OFFICER PENTEGRA DENTAL GROUP, INC. The Corporation is authorized to issue Common Stock, par value $.001 per share and Preferred Stock, par value $.001 per share. The Board of Directors of the Corporation has authority to fix the number of shares and the designation of any series of Preferred Stock and to determine the powers, designations, preferences and relative, participating, optional or other rights between classes of stock or series thereof of the Corporation, and the qualifications, limitations or restrictions of such preferences and/or rights. The Corporation will furnish without charge to each stockholder who so requests a full statement of the foregoing as established from time to time by the Restated Certificate of Incorporation of the Corporation and by any certificate of designations. Any such request shall be made to the Secretary of the Corporation at the offices of the Corporation. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common UNIF GIFT MIN ACT -- _____________ Custodian _______________ TEN ENT -- as tenants by the entireties (Cust) (Minor) JT TEN -- as joint tenants with right of under Uniform Gifts to Minors survivorship and not as tenants Act ___________________________________ in common (State) UNIF TRF MIN ACT -- ____________ Custodian (until age _____) (Cust) ________________ under Uniform Transfers to Minors Act __________________________ (State) Additional abbreviations may also be used though not in the above list. ASSIGNMENT For Value Received, _________________________________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE ______________________________________ | | | | _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE _____________________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________________ ______________________________________________________________________________________________________________________ Shares of the Common Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint ____________________________________________________________________________________________________________________ Attorney to register the transfer of the said shares of Common Stock on the books of the within-named Corporation, with full power of substitution in the premises. Dated _________________________________ X _______________________________________________ (SIGNATURE) NOTICE: THE SIGNATURE(S) TO THE ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN ---------------> X _______________________________________________ UPON THE FACE OF THE (SIGNATURE) CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ANY CHANGE WHATEVER. _________________________________________________ THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-16. _________________________________________________ SIGNATURE(S) GUARANTEED BY: _________________________________________________
EX-5.1 54 EXHIBIT 5.1 [LETTERHEAD] December 10, 1997 Pentegra Dental Group, Inc. 2999 N. 44th Street Suite 650 Phoenix, Arizona 85018 Re: Registration Statement on Form S-1 of Pentegra Dental Group, Inc. Registration No. 333-37633 Gentlemen: We are acting as counsel for Pentegra Dental Group, Inc., a Delaware corporation (the "Company"), in connection with the registration under the Securities Act of 1933, as amended (the "Act"), of the offer and sale of up to 2,500,000 shares (and up to an additional 375,000 shares to cover underwriters' over-allotments) of the Company's Common Stock, par value $.001 per share (the "Shares"). A Registration Statement on Form S-1, Registration No. 333-37633 has been filed with the Securities and Exchange Commission (the "Commission") and we understand that an Amendment No. 1 to From S-1 is expected to be filed with the Commission on or about the date hereof (as amended, the "Registration Statement"). The Shares are to be sold to the underwriters for resale to the public as described in the Registration Statement and pursuant to the underwriting agreement (the "Underwriting Agreement") filed as an exhibit to the Registration Statement. In reaching the conclusions expressed in this opinion we have examined and relied on such documents, corporate records and other instruments, including certificates of public officials and certificates of officers of the Company, and made such further investigation and inquiry as we have deemed necessary to reach the opinions expressed herein. In making the foregoing Pentegra Dental Group, Inc. December 10, 1997 Page 2 examinations, we have assumed the genuineness of all signatures on original documents, the authenticity, accuracy and completeness of all documents submitted to us as originals and the conformity to original documents of all copies submitted to us. Based solely upon the foregoing, subject to the comments and exceptions hereinafter stated, it is our opinion that the Shares, when sold by the Company in accordance with the terms of the Underwriting Agreement for consideration having a value not less than the par value thereof, will be validly issued, fully paid and nonassessable. We express no opinion as to the laws of any jurisdiction other than the General Corporation Law of the State of Delaware and the federal laws of the United States of America, in each case as in effect on the date hereof. We hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the reference to our firm therein under the caption "Legal Matters." In giving this consent, we do not admit that we come within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission promulgated thereunder. Very truly yours, /s/ Jackson Walker, L.L.P. Jackson Walker, L.L.P. EX-23.1 55 EXHIBIT 23.1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this registration statement on Form S-1 (File No. 333-37633) relating to the registration of 2,500,000 shares of $0.001 par value common stock of our report dated December 10, 1997 on our audit of the financial statements of Pentegra Dental Group, Inc. as of September 30, 1997 and for the period from inception, February 21, 1997, through September 30, 1997. We also consent to the reference to our firm under the caption "Experts." /s/ COOPERS & LYBRAND L.L.P. Houston, Texas December 11, 1997 EX-27.1 56 EXHIBIT 27.1
5 1,000 OTHER DEC-31-1997 FEB-21-1997 SEP-30-1997 354 0 0 0 0 354 69 0 2,071 1,006 0 1,089 0 18 708 2,071 0 0 0 0 750 0 0 (750) 0 (750) 0 0 0 (750) 0 0
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