EXHIBIT 10.22
January 28, 2000
To the Parties on the Signature Page
Re: Castle Dental Centers of California, L.L.C.
Ladies & Gentlemen:
The purpose of this letter is to set forth certain agreements among Castle
Dental Centers of California, L.L.C., a Delaware limited liability company
("Castle West"), CDC of California, Inc., a Delaware corporation ("CDC"), Castle
Dental Centers, Inc., a Delaware corporation ("Castle Dental," and together with
Castle West and CDC, the "Castle Parties"), and each of the other parties listed
on the signature page hereto (the "DCS Parties" and, collectively with the
Castle Parties, the "Parties").
(A) The Parties hereto have previously entered into the following
agreements (hereinafter, the "Castle West Transaction Documents"):
1. The Master Contribution and Combination Agreement, dated as of
January 30, 1998, among the Castle Parties and the DCS Parties, as amended
by the First Amendment to Master Contribution and Combination Agreement
dated as of February 27, 1998, the Second Amendment to Master Contribution
and Combination Agreement dated as of March 16, 1998, and the Third
Amendment to Master Contribution and Combination Agreement dated as of
March 30, 1998 (as so amended, the "Combination Agreement");
2. The letter agreement dated as of May 29, 1998, among the Castle
Parties and the DCS Parties (the "Letter Agreement");
3. The Limited Liability Company Agreement of Castle West dated as
of March 30, 1998 ("Limited Liability Company Agreement"), among Castle
Dental, CDC, Castle West Holdings, LLC, a California limited liability
company ("Holdings"), and Dental Consulting Services, LLC, a California
limited liability company ("DCS");
4. The Management Agreement between Castle West and Holdings dated
as of March 30, 1998 ("Management Agreement");
5. The Shareholders' Agreement between the Castle Parties and the
DCS Parties dated as of March 30, 1998 ("Shareholders' Agreement");
6. The Registration Rights Agreement between Castle Dental and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, D.D.S. ("▇. ▇▇▇▇▇▇▇▇▇"), ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
D.M.D. ("▇▇▇▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.D.S. ("▇. ▇▇▇▇▇▇▇▇▇"), ▇▇▇▇▇▇
▇▇▇▇▇▇▇, D.D.S. ("▇▇▇▇▇▇▇"), Dental Advisory Group, LLC, a California
limited liability company ("DAG"), and ▇▇▇▇▇ ▇'▇▇▇▇▇▇▇ ("▇'▇▇▇▇▇▇▇"),
dated March 30, 1998 (the "Registration Rights Agreement");
7. Confidentiality and Noncompetition Agreements each dated as of
March 30, 1998 (the "Noncompetition Agreements") between Castle Dental and
each of ▇. ▇▇▇▇▇▇▇▇▇, Soleimani, ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and DAG;
8. Operating Agreement dated as of March 30, 1998 for Holdings among
▇. ▇▇▇▇▇▇▇▇▇, Soleimani, ▇. ▇▇▇▇▇▇▇▇▇, Schlang, ▇'▇▇▇▇▇▇▇ and DAG
("Holdings Operating Agreement");
9. Consulting Agreement dated as of March 30, 1998 between Holdings
and DAG ("Consulting Agreement");
10. 8% Subordinated Notes of Castle Dental each dated March 30, 1998
issued to each of ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and DAG
in the aggregate original principal amount of $2,689,151 (the "Original
Notes");
11. Subordination Agreements dated as of March 30, 1998
("Subordination Agreements"), by and among Castle Dental, Nationsbank of
Texas, N.A. and each of ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and
DAG; and
12. Assumption Agreement, dated March 30, 1998, by Castle West and
DCS ("Assumption Agreement").
As a result of the consummation of the transactions contemplated by the
Castle West Transaction Documents, CDC acquired the Class A and Class D
Membership Interests in Castle West, DCS acquired the Class B Membership
Interest in Castle West and Holdings acquired the Class C Membership Interest in
Castle West. ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ currently serve as directors of Castle
West, and ▇. ▇▇▇▇▇▇▇▇▇ serves as President, and ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇▇ each serve as a Vice President of Castle West.
(B) In addition, in connection with the foregoing, the following documents
were executed by Castle West in connection with Castle Dental's bank facility
(hereinafter, the "Castle Bank Documents"):
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1. Guarantee, dated as of March 30, 1998, by Castle West in favor of
Nationsbank of Texas, N.A., as amended or supplemented to date;
2. Security Agreement, dated as of March 30, 1998, by Castle West in
favor of Nationsbank of Texas, N.A., as amended or supplemented to date;
3. Financing Statement, dated as of March 30, 1998, by Castle West
in favor of Nationsbank of Texas, N.A., as amended or supplemented to
date; and
4. Certain other documents evidencing Castle West's liabilities, if
any, with respect to Castle Dental's senior creditors.
(C) In addition, in connection with the foregoing, the following documents
were executed by the DCS Parties and never delivered to the Castle Parties
(collectively, the "Undelivered Documents"):
1. Asset Purchase Agreement between ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.D.S., Inc.
("▇▇▇▇▇▇▇▇▇, Inc.") and DCS (the "▇▇▇▇▇▇▇▇▇ Agreement").
2. Asset Purchase Agreement between ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, D.D.S., Inc.
("▇▇▇▇▇▇▇, Inc.") and DCS (the "▇▇▇▇▇▇▇ Agreement").
3. Asset Purchase Agreement between ▇.▇. ▇▇▇▇▇▇▇▇▇, D.M.D., Inc.
("▇▇▇▇▇▇▇▇▇, Inc.") and DCS (the "▇▇▇▇▇▇▇▇▇ Agreement" and, together with
the ▇▇▇▇▇▇▇▇▇ Agreement and the ▇▇▇▇▇▇▇ Agreement, the "Asset Purchase
Agreements").
4. Management Services Agreement between Castle West and ▇▇▇▇▇▇▇▇▇,
Inc. ("▇▇▇▇▇▇▇▇▇ MSO").
5. Stock Put/Call Option and Successor Designation Agreement between
Castle West, Schechter, Inc. and ▇. ▇▇▇▇▇▇▇▇▇ regarding the outstanding
capital stock of ▇▇▇▇▇▇▇▇▇, Inc. ("▇▇▇▇▇▇▇▇▇ Buy/Sell").
6. Management Services Agreement between Castle West and ▇▇▇▇▇▇▇,
Inc. ("▇▇▇▇▇▇▇ MSO").
7. Stock Put/Call Option and Successor Designation Agreement between
Castle West, Schlang, Inc. and ▇▇▇▇▇▇▇ regarding the outstanding capital
stock of ▇▇▇▇▇▇▇, Inc. ("▇▇▇▇▇▇▇ Buy/Sell").
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8. Management Services Agreement between Castle West and ▇▇▇▇▇▇▇▇▇,
Inc. ("▇▇▇▇▇▇▇▇▇ MSO" and collectively with the ▇▇▇▇▇▇▇▇▇ MSO and the
▇▇▇▇▇▇▇ MSO, the "MSO Agreements").
9. Stock Put/Call Option and Successor Designation Agreement between
Castle West, Soleimani, Inc. and ▇▇▇▇▇▇▇▇▇ regarding the outstanding
capital stock of ▇▇▇▇▇▇▇▇▇, Inc. ("▇▇▇▇▇▇▇▇▇ Buy/Sell" and collectively
with the ▇▇▇▇▇▇▇▇▇ Buy/Sell and the ▇▇▇▇▇▇▇ Buy/Sell, the "Buy/Sell
Agreements").
(D) The following forms of consideration have not yet been paid or
delivered by the Castle Parties to the DCS Parties pursuant to the Castle West
Transaction Documents and the MSO Agreements (collectively, the "Outstanding
Castle Obligations"):
1. The "Acquisition Purchase Price Adjustment" as defined in Section
3.4 of the Combination Agreement;
2. The "B Merger Consideration" as defined in Section 7.1 of the
Combination Agreement;
3. The "C Merger Consideration" as defined in Section 8.1 of the
Combination Agreement, as well as any Incentive Payment payable pursuant
to the provisions of Section 8.1(c) of the Combination Agreement;
4. Certain distributions of cash payable pursuant to Article 8 of
the Limited Liability Company Agreement;
5. Certain management fees payable pursuant to Section 3 of the
Management Agreement (including any amounts which Holdings was to use to
pay the Consulting Fee to DAG pursuant to Section 4 of the Consulting
Agreement); and
6. Certain Gross Practice Revenues (as defined in the MSO
Agreements) excluded from MSO compensation under the MSO Agreements.
On July 22, 1999, the DCS Members appropriately gave notice to the Castle
Parties of their exercise of their right to cause the B Merger (as defined in
the Contribution Agreement). On September 30, 1999, Castle West gave notice to
Holdings of Castle West's intention not to extend the term of the Management
Agreement beyond its initial term and consequently the Management Agreement will
terminate by its terms on March 30, 2000. On November 17, the Castle Parties
delivered to counsel for the DCS Parties for the benefit and on behalf of the
DCS Parties a wire
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transfer payable to the trust account of ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ & Handler,
LLP in the amount of $300,000. The character of such payment, which is
non-refundable, shall be determined in accordance with Section (E)18 below.
Certain differences and disagreements have arisen between the Parties
hereto with regard to the foregoing transactions (the "Castle West Transaction")
and the Parties hereto desire to settle all of their differences in the manner
stated below:
(E) NOW, THEREFORE, in consideration of the foregoing, the Parties hereto
agree as follows:
1. Other than as specifically stated to the contrary in this
Agreement below, following the Payment Date (as defined below), if any,
the Parties hereto shall have no further obligations under the Castle West
Transaction Documents and the Undelivered Documents (collectively, the
"Existing Documents"), and such agreements shall be terminated and be of
no further force or effect.
The Castle Bank Documents shall remain in full force and effect
following the Closing. However, each of the Castle Parties, jointly and
severally, shall indemnify and hold each of the DCS Parties, and any
affiliate or related person thereof (other than Castle West), harmless
from and against any and all Damages (as defined in the Combination
Agreement) suffered by any DCS Party, and any affiliate or related person
thereof (other than Castle West), following the Payment Date as a result
of, caused by, arising out of, or in any way relating to the Castle Bank
Documents.
2. The closing of the transactions contemplated hereby ("Closing")
shall occur when all documents required to be signed are signed by all
Parties hereto and delivered at the law offices of ▇▇▇▇, Scholer, Fierman,
▇▇▇▇ & Handler, LLP in Los Angeles, California on or before January 28,
2000. At the Closing, the Parties hereto shall deliver the items as stated
below. The Parties agree that for purposes of holding and delivering
documents under this Agreement, counsel for the DCS Parties is ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ & Handler, LLP and counsel for the Castle Parties
is ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇ Incorporated. All items shall be exchanged and
delivered to the respective legal counsel for the Parties. If the Closing
does not occur on or before January 28, 2000, the provisions of this
Agreement shall be terminated and be of no further force and effect.
(a) The respective DCS Parties shall deliver to counsel for
the Castle Parties executed copies of the Undelivered Documentation.
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(b) The DCS Parties shall deliver to counsel for the DCS
Parties the following:
(i) DCS shall deliver membership certificates and a
membership power transferring the Class B Membership Interest
in Castle West to CDC free and clear of all liens other than
those that may exist under any of the Castle West Transaction
Documents in favor of the Castle Parties, effective only after
the occurrence of the Payment Date;
(ii) Holdings shall deliver membership certificates and
a membership power transferring the Class C Membership
Interest in Castle West to CDC free and clear of all liens
other than those that may exist under any of the Castle West
Transaction Documents in favor of the Castle Parties,
effective only after the occurrence of the Payment Date; and
(iii) J & K Partnership, a California general
partnership ("J&K"), and ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, as the
respective landlords under the following leases:
(x) lease agreement dated August 1, 1996, by and
between J&K", as the landlord, and ▇▇▇▇▇▇▇▇▇, Inc. as
the tenant, regarding the premises located at ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ (as amended by
First Amendment to Lease Agreement dated effective as of
November 1, 1996), which lease has been assigned by
▇▇▇▇▇▇▇▇▇, Inc. to DCS and has been further assigned by
DCS to Castle West such that Castle West is currently
the tenant thereunder (the "Hawthorne Lease"); and
(y) lease agreement dated August 1, 1996, by and
between ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, as the landlord, and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Inc. as the tenant, regarding the
premises located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ (as amended by First Amendment to Lease
Agreement dated effective as of November 1, 1996), which
lease has been assigned by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Inc. to DCS
and has been further assigned by DCS to Castle West such
that Castle West is currently the tenant thereunder (the
"South Gate Lease");
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shall enter into new lease agreements (the "New Leases") with
Castle West replacing the Hawthorne Lease and the South Gate
Lease. The New Leases shall be in the forms of Exhibits A-1
and A-2 attached hereto; and
(iv) The side letter agreement between the DCS Parties
and the Castle Parties (the "Side Letter Agreement"), which
shall supercede the provisions of this Agreement.
(c) The Castle Parties shall deliver to counsel for the DCS
Parties:
(i) three original executed copies of this Letter;
(ii) the New Leases;
(iii) guaranties by Castle Dental of the obligations of
Castle West under the New Leases and the month-to-month lease
by and between ▇▇▇▇▇▇▇, as the landlord, and Castle West as
the tenant, regarding the premises located at ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ (the "Burbank Lease");
(iv) a check in the amount of $3,000.00 made payable to
▇▇▇▇▇ ▇▇▇▇▇▇ in payment of services rendered in dissolving
corporations owned by ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇; and
(v) the Side Letter Agreement.
Counsel for the DCS Parties shall hold copies of the executed documents
described in Section (E)2(b) and Section (E)2(c) (the "Remaining
Documents") in escrow pending the occurrence of the Payment Date. If the
Payment Date occurs, Counsel for the DCS Parties shall deliver the
Remaining Documents to the Castle Parties. If the Payment Date does not
occur, Counsel for the DCS Parties shall deliver the Remaining Documents
to the DCS Parties, upon which time they shall be cancelled and of no
effect and shall be null and void.
3. On or prior to February 1, 2000, Castle Dental shall (a) wire
transfer to the trust account of ▇▇▇▇, Scholer, Fierman, ▇▇▇▇ & Handler,
LLP, $5,000,000 as a final payment in settlement of, and in lieu of, all
amounts owed by the Castle Parties to the DCS Parties as Outstanding
Castle Obligations or otherwise in connection with the Castle West
Transaction, (b) delivery of checks to ▇▇▇▇, Scholer, Fierman, ▇▇▇▇ &
Handler, LLP made payable to the DCS Members equal the past-due interest
and principal payments on the
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Current Notes and (c) delivery of a check in the amount of $9,493 payable
to ▇▇▇▇, Scholer, Fierman, ▇▇▇▇ & Handler, LLP to be held in trust for
payment of the amounts payable under Sections (E)12(d) and (E)12(g)
hereunder (collectively, the "Full Settlement Amount"). If the Castle
Parties pay the Full Settlement Amount on or prior to February 1, 2000,
then the date that such payment is received shall be the "Payment Date".
If the Castle Parties do not pay the Full Settlement Amount by February 1,
2000, there shall be no Payment Date hereunder and all transactions and/or
amendments contemplated hereby that are predicated on the occurrence of
the Payment Date shall be of no force and effect. Notwithstanding anything
herein to the contrary, the Castle Parties shall remain obligated to pay
to the DCS Parties distributions of cash payable pursuant to Article 8 of
the Limited Liability Company Agreement that accrue during the three-month
period ending December 31, 1999 ("Fourth Quarter Earnings"), such amount
to be payable on March 15, 2000.
4. If the Payment Date does not occur, the Existing Documents shall
remain in full force and effect except for those Existing Documents that
are specifically amended herein effective as of the Closing, which
Existing Documents shall remain amended as described herein following the
Closing regardless of the occurrence or nonoccurrence of the Payment Date.
If the Payment Date does not occur, on February 1, 2000, the Castle
Parties shall: (a) wire transfer to the trust account of ▇▇▇▇, Scholer,
Fierman, ▇▇▇▇ & Handler, LLP $336,530; (b) file the B Merger Certificate
(as defined in the Combination Agreement) with the Delaware Secretary of
State and (c) deliver 421,116 shares of Castle Dental Common Stock to the
DCS Parties as payment in full of the B Merger Consideration
(collectively, the "Partial Settlement Amount"). The shares of Castle
Dental Common Stock deliverable pursuant to item (c) of this Section (E)4
shall be dated as of July 22, 1999, the date the B Merger Notice was
provided to Castle Dental, and such shares shall be deemed for all
purposes to have been outstanding since such date. Following payment of
the Partial Settlement Amount, if made on or before February 1, 2000, the
Castle Parties shall be relieved of any obligation to pay any further
amounts regarding (i) the Acquisition Purchase Price Adjustment applicable
to the purchase of the Class A Membership Interest and the Class B
Membership Interest, (ii) any payments due and owing by the Castle Parties
or otherwise accrued through December 31, 1999 or which should otherwise
have been paid by the Castle Parties on or prior to such date as (x)
management fees payable pursuant to Section 3 of the Management Agreement
(including any amounts which Holdings was to use to pay the Consulting Fee
to DAG pursuant to Section 4 of the Consulting Agreement); or (y) Gross
Practice Revenues excluded from MSO compensation under the MSO Agreements,
(iii) any payments due and owing by the Castle Parties or otherwise
accrued through September 30, 1999 or which should otherwise have been
paid by the Castle Parties on or prior to such date as distributions of
cash payable pursuant to Article 8 of the Limited Liability Company
Agreement and (iv) the B Merger Consideration (collectively, the
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"Adjustment Obligations"). Notwithstanding anything herein to the
contrary, the Castle Parties shall remain obligated to pay to the DCS
Parties the Fourth Quarter Earnings, such amount to be payable on March
15, 2000.
5. If the Payment Date does not occur, in addition to payment and
delivery of the Partial Settlement Amount and the Fourth Quarter Earnings,
the Castle Parties shall immediately resume making all payments due under
the Existing Documents to the extent the obligation to make such payments
accrues on or after January 1, 2000 in accordance with the terms of the
Existing Documents, the Management Agreement shall be terminated as of
March 30, 2000, and the DCS Parties shall be entitled to receive the C
Merger Consideration upon delivery of the C Merger Notice (as defined in
the Contribution Agreement). The Parties agree that time is strictly of
the essence regarding the obligations of the Parties under this agreement.
In addition, if the Partial Settlement Amount is not timely paid and
delivered on or before February 1, 2000, the Castle Parties shall not be
relieved of any obligations under any agreement giving rise to the
Adjustment Obligations and shall be obligated to pay the full amount
thereof including, without limitation, the Adjustment Obligations.
6. The Asset Purchase Agreements and all documents transferring
ownership of the assets of DCS's business to Castle West as described
therein shall remain in full force and effect in order to effect the
transfer of such assets of ▇▇▇▇▇▇▇▇▇, Inc., ▇▇▇▇▇▇▇, Inc. and ▇▇▇▇▇▇▇▇▇,
Inc. to DCS, and the subsequent transfer of DCS's assets (with the
exception of any interest in or assets of the Canoga Park office which was
not, and shall not be deemed to have been, transferred) to Castle West.
The Parties hereto hereby ratify the transfers of all of such assets to
Castle West and agree that, following the Closing, Castle West shall
continue to own and operate the assets and business it acquired from DCS
in connection with the Castle West Transaction, subject to the terms and
provisions of the New Leases and the Burbank Lease. The Parties further
agree that following the Payment Date Castle West shall be owned solely by
CDC.
7. The Parties hereto hereby ratify the assumption of the
obligations, liabilities and responsibilities under the Assumption
Agreement and related documents and agree that Castle West shall continue
to pay such obligations and liabilities and to perform such
responsibilities in accordance with their respective terms.
8. The consideration previously received by the DCS Parties,
regardless of the form thereof, shall be retained by the DCS Parties and
the Original Notes and the Subordination Agreements shall remain in full
force and effect following the Closing.
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9. Following the earlier of March 30, 2000 or the Payment Date,
other than as set forth in Sections (E)11 and (E)12 hereof, no DCS Party
shall be obligated to provide any services to any Castle Party pursuant to
any Existing Document, oral employment agreement or otherwise. Following
the Closing, the Castle Parties shall be free to contract with ▇'▇▇▇▇▇▇▇
in any capacity. Effective as of the Payment Date, ▇. ▇▇▇▇▇▇▇▇▇, ▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ hereby resign from all of their positions
as officers and/or directors of Castle West.
10. Following the Closing, the Noncompetition Agreements shall be
and are hereby amended and restated as set forth in Exhibit B attached
hereto and incorporated herein by this reference, with such agreement
remaining in full force and effect following the Closing as so amended.
11. Following the Closing, the MSO Agreements shall remain in full
force and effect provided that the MSO Agreements (other than the
▇▇▇▇▇▇▇▇▇ MSO Agreement) shall be and hereby are amended as of the Payment
Date to delete the $2,500 per month exclusion of Gross Practice Revenues
from the compensation payable to the MSO thereunder (the "Ownership Fee").
Following the Closing, the $2,500 per month Ownership Fee shall remain
payable to ▇▇▇▇▇▇▇▇▇, Inc. until such time as the Capital Stock of
▇▇▇▇▇▇▇▇▇, Inc. is transferred to a qualified transferee pursuant to
Section (E)12(d) below.
12. Following the Closing, the Buy/Sell Agreements shall remain in
full force and effect provided that as of the Payment Date they shall be
and hereby are amended as follows:
(a) The Put Option and the Call Option currently set forth in
Sections 2 and 3 are deleted in their entirety.
(b) The MSO may exercise the Successor Designation Option set
forth in Section 5 upon its determination that it has located a
qualified successor to purchase all of the outstanding Capital Stock
of the applicable PC. The dentist owning the Capital Stock of each
PC ▇▇▇▇▇▇ agrees that he will not attempt to transfer such Capital
Stock to any person other than the qualified successor to be
designated by the Castle Parties.
(c) The Purchase Price of the Capital Stock of the PC (as
defined in Section 10) shall be $100.00 in cash.
(d) The dentist owning the Capital Stock in the applicable PC
(other than ▇. ▇▇▇▇▇▇▇▇▇) ▇▇▇▇▇▇ agrees to continue to serve as the
dentist of record for such PC
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at all of its current locations until the later to occur of (i) the
date Castle West designates a successor and the Capital Stock of the
applicable PC is transferred to such successor and (ii) March 30,
2000. ▇. ▇▇▇▇▇▇▇▇▇ hereby agrees to continue to serve as the dentist
of record for ▇▇▇▇▇▇▇▇▇, Inc. at its current location at ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, until the earlier to occur
of (1) the date 90 days following the date he gives notice that he
desires that Castle West designate a successor owner of ▇▇▇▇▇▇▇▇▇,
Inc., (2) the occurrence of any "Transfer Event" (as defined in
Section 5(a) of the ▇▇▇▇▇▇▇▇▇ Buy/Sell), (3) the date 30 days
following the date that ▇▇▇▇▇▇ ▇▇▇▇ gives notice that it desires to
designate a successor owner of ▇▇▇▇▇▇▇▇▇, Inc. and (4) the second
anniversary of the Payment Date. In the event that Castle West
elects to cause ▇. ▇▇▇▇▇▇▇▇▇ to transfer the Capital Stock of
▇▇▇▇▇▇▇▇▇, Inc. pursuant to the provisions of section (3) of the
previous sentence, Castle West shall be obligated to pay, as a
condition of closing of such transfer of such Capital Stock, the
Ownership Fees that would have been paid to ▇▇▇▇▇▇▇▇▇, Inc. between
the date of such transfer and the second anniversary of the Payment
Date. Upon the transfer of the Capital Stock of ▇▇▇▇▇▇▇▇▇, Inc., ▇.
▇▇▇▇▇▇▇▇▇ shall be reimbursed for any pension administration fees
for termination of his PC Pension/Profit Sharing Plan, in an amount
not to exceed $5,000 upon submission of invoices therefor to ▇▇▇▇,
Scholer, ▇▇▇▇▇▇▇, ▇▇▇▇ & Handler, LLP which ▇▇▇▇, Scholer, ▇▇▇▇▇▇▇,
▇▇▇▇ & Handler, LLP shall be entitled to pay at its sole discretion
out of the funds delivered to ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ &
Handler, LLP by Castle Dental pursuant to Section (E)3(c) above. ▇.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ agrees to indemnify and hold harmless the Castle
Parties from any and all Damages that they may incur as a result of
any violation of ERISA by ▇▇▇▇▇▇▇▇▇, Inc. or ▇. ▇▇▇▇▇▇▇▇▇ in the
administration or termination of such PC Pension/Profit Sharing
Plan.
(e) The Castle Parties hereby agree to locate a qualified
successor to purchase all of the outstanding Capital Stock of each
PC (other than ▇▇▇▇▇▇▇▇▇, Inc.) subject to a Buy/Sell Agreement and
to cause such purchaser to purchase the Capital Stock of each PC
(other than ▇▇▇▇▇▇▇▇▇, Inc.) as soon a practicable but no later than
March 30, 2000, after which date the dentist owning such PC shall
have no further obligation to provide any further services to such
PC or to any Castle Party. The Castle Parties hereby agree to locate
a qualified successor to purchase all of the outstanding Capital
Stock of ▇▇▇▇▇▇▇▇▇, Inc. and to cause such purchaser to purchase the
Capital Stock of ▇▇▇▇▇▇▇▇▇, Inc. no later than the date ▇.
▇▇▇▇▇▇▇▇▇'▇ obligation to serve as dentist of record for ▇▇▇▇▇▇▇▇▇,
Inc. expires in accordance with the provisions of the last sentence
of Section (E)12(d) above, after which date ▇. ▇▇▇▇▇▇▇▇▇ shall have
no further obligation to provide any further services to ▇▇▇▇▇▇▇▇▇,
Inc. or to any Castle Party. Following such date, the purchaser of
such
11
Capital Stock shall become the dentist of record for all locations
of such PC. If ▇. ▇▇▇▇▇▇▇▇▇ so requests, following the purchase of
the Capital Stock of ▇▇▇▇▇▇▇▇▇, Inc., he may, but shall not be
required to, continue to practice dentistry at the Hawthorne
location for a period ending on the third anniversary of the Closing
Date (unless such period is extended at the discretion of Castle
West), subject to the reasonable supervision of the dentist then
owning ▇▇▇▇▇▇▇▇▇, Inc.
(f) If an existing patient requests to consult with a DCS
Member, the Castle Parties shall use good faith efforts to give such
information to the applicable DCS Party by telephonic and/or voice
message at a number designated by the applicable DCS Member with
such action to occur within 24 hours of the time such patient
request is received by a Castle Party or its representative or
employee. If such DCS Party cannot be reached to provide such
information, the Castle Parties shall reasonably attempt to provide
such patient with professional quality care and treatment by another
dentist. The Castle Parties hereby agree, that if a DCS Party who is
a dentist requests to see an existing patient of such DCS Party at
one of the offices managed by Castle West and reasonably asserts
that the reason for his request to provide services to such patient
is that he is required to provide such services under applicable
law, such DCS Party shall be allowed to provide such services to
such patient at such Castle West office but shall be entitled to no
remuneration for such services from such office.
(g) The Castle Parties agree to pay for and maintain
malpractice insurance coverage for dentists who are DCS members in a
manner which is substantially similar to such insurance presently in
effect, and further agree to pay for and maintain after the Payment
Date such malpractice insurance commonly referred to as a "tail" for
the dentists who are DCS Members covering the period they served as
dentists at a PC so that such dentists are continuously covered by
malpractice insurance without any gap in malpractice insurance
coverage. Such malpractice insurance coverage will be purchased for
each owner of a PC on or prior to the date the Capital Stock of such
PC is transferred to a qualified successor and the purchase of such
insurance will be a condition precedent to the closing of the sale
of such Capital Stock. ▇. ▇▇▇▇▇▇▇▇▇ shall purchase his own
malpractice insurance and shall submit an invoice therefor to ▇▇▇▇,
Scholer, Fierman, ▇▇▇▇ & Handler, LLP in an amount not to exceed
$4,493 which ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ & Handler, LLP shall be
entitled to pay at its sole discretion out of the funds delivered to
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ & Handler, LLP by Castle Dental
pursuant to Section (E)3(c) above. Prior to such dates, the Castle
Parties agree to keep the malpractice insurance currently in force
at the PCs in effect.
12
(h) Upon the closing of a transaction designating a successor
dentist for a PC, the name of the PC shall be changed so that its
new name is not substantially similar to its then existing name and
does not use the name of any DCS Party and the dentist transferring
the PC shall have the right to use his name in any other business or
entity. The Castle Parties shall reimburse such dentist for
reasonable legal and accounting fees incurred in connection with
such transfer in an amount not to exceed $5,000 for each such
transfer limited to one per PC. Payment of such reasonable legal and
accounting fees shall be payable at the closing of the transfer of
the Capital Stock of the PC, upon presentment of an invoice
itemizing such amounts.
(i) For 18 months following the Payment Date, ▇. ▇▇▇▇▇▇▇▇▇ and
▇. ▇▇▇▇▇▇▇▇▇ shall be permitted to practice one day per month at
their choosing at either the Hawthorne or South Gate locations, on
any patients they choose. In addition, for a period of 24 months
following the Payment Date, ▇. ▇▇▇▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇▇▇▇ shall be
permitted to treat their family members at either the Hawthorne or
South Gate locations. In connection with dental services provided
pursuant to this subsection: (w) neither ▇. ▇▇▇▇▇▇▇▇▇ nor ▇.
▇▇▇▇▇▇▇▇▇ will receive any compensation for dental services provided
or be charged for use of the Castle Parties' facilities; (x) ▇.
▇▇▇▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇▇▇▇ shall not be entitled to the assistance
of any of the Castle Parties' staff; (y) ▇. ▇▇▇▇▇▇▇▇▇ and ▇.
▇▇▇▇▇▇▇▇▇ shall reimburse the Castle Parties for any supplies used
or third-party costs incurred; and (z) ▇. ▇▇▇▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇▇▇▇
shall indemnify and hold harmless the Castle Indemnitees for any
Damages they may incur as a result of any malpractice claims brought
in connection with such dental services. If ▇. ▇▇▇▇▇▇▇▇▇ provides
dental services to patients who are obligated to pay in accordance
with Castle West's then existing fee structure, ▇. ▇▇▇▇▇▇▇▇▇ shall
be compensated for such services in accordance with past practices
and, with respect to such services provided, he shall not be subject
to the provisions of the immediately preceding sentence.
(j) The Castle Parties acknowledge that ▇▇▇▇▇▇▇▇▇, Inc. is
currently sponsoring four doctors in its office for U.S.
citizenship. The Castle Parties hereby agree, to the full extent
permitted by law, to continue sponsoring such individuals for U.S.
citizenship, provided that their continued employment with
▇▇▇▇▇▇▇▇▇, Inc. shall be dependent upon their job performance.
(k) ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ shall be entitled to
continue to receive orthodontic treatment at the Hawthorne office at
no cost or expense to them.
13
(l) For a period of eighteen months following the Payment
Date, the Castle Parties shall provide COBRA health insurance
coverage to the DCS Members and their families who are currently
covered by health insurance through any Castle Party, at such DCS
Member's expense.
In addition, each of the Castle Parties, jointly and severally,
shall indemnify and hold each of the DCS Parties, and any affiliate or
related person thereof, harmless from and against any and all Damages
suffered by any DCS Party, and any affiliate or related person thereof, as
a result of, caused by, arising out of, or in any way relating to the
ownership, operation or conduct of a PC (other than a DCS Party's
liability for his own malpractice or for any violations of ERISA in
connection with the administration or termination of the PC Pension/Profit
Sharing Plan in place at ▇▇▇▇▇▇▇▇▇, Inc.) or the operation of the business
of any Castle Party. Each owner of a PC hereby represents and warrants to
the Castle Parties that (i) the only business that is currently being
conducted by his PC (except as requested by a Castle Party or its
affiliate) or that will be conducted by his PC as long as he is the owner
thereof and the applicable Buy/Sell Agreement remains in effect is the
provision of dental services consistent with the terms of the applicable
MSO Agreement, (ii) other than the MSO Agreement with Castle West and
employment agreements with dentists employed by his PC, his PC is not a
party to any material agreement or contract other than those disclosed in
or contemplated by the Castle West Transaction Documents or any
replacement, renewal or similar substitution or extension thereof and
(iii) his PC has no debt obligations outstanding and will not incur any
debt as long as the applicable Buy/Sell Agreement remains in effect. The
Castle Parties hereby represent and warrant that all payments owed to the
PCs to date have been paid in full. The Castle Parties agree to indemnify
and hold harmless the owners of the PCs from any and all Damages any of
them may incur resulting from any obligation that any Castle Party causes
such PC to incur, directly or indirectly, which is not otherwise paid.
13. Following the Closing, the Limited Liability Agreement shall
remain in full force and effect provided that as of the Payment Date CDC
shall be the only party thereto; provided, however, that the provisions of
Articles 11 (with respect to any period as to which any DCS Party was a
Member of Castle West), 12 and 13 thereof shall continue for the benefit
of, and shall be enforceable by, each DCS Party as if each such DCS Party
was set forth in such agreement as a party thereto entitled to the
benefits thereof.
14. Following the Payment Date, the terms and provisions of the
Combination Agreement shall terminate other than the terms and provisions
of:
14
(a) Section 15.2, (which shall also be deemed to refer to any
Books and Records (as defined in the Combination Agreement) of
Castle West related to the operation of Castle West and its
predecessors whether or not such Books and Records were transferred
to Castle West in connection with the consummation of the
transactions contemplated by the Castle West Transaction Documents)
which shall continue for a period of no less than six years from the
date of the Payment Date; and
(b) Section 17.1 items (b) and (c) and the other applicable
procedural provisions set forth in Article 17, which will survive
until the end of the statute of limitation with respect to any
applicable possible claim thereunder.
The Parties agree that the transactions contemplated hereby are being
entered into and consummated at the Payment Date in lieu of consummating
the B Mergers and the C Mergers contemplated by the Combination Agreement
and otherwise requiring the Castle Parties to pay the Outstanding Castle
Obligations.
15. Other than the obligations of the respective Parties under this
Agreement and those provisions of the Existing Documents specifically
preserved by this Agreement (including, without limitation, the
obligations of the Castle Parties to pay or deliver certain amounts and
securities to the DCS Parties with respect to the Outstanding Castle
Obligations), all of which shall remain for all purposes in full force and
effect in accordance with their respective terms and provision (as
modified, as applicable, by this Agreement), for and in consideration of
the releases and indemnities set forth herein and entry into this
Agreement and the delivery of the documents required hereby, effective as
of the Closing, each of the Castle Parties does hereby release, remise and
forever discharge each of the DCS Parties and their respective heirs,
successors, assigns, legal and personal representatives, estates,
devisees, legatees, past or present officers, directors, employees,
shareholders, stockholders, parent and subsidiary corporations, agents,
affiliates and their attorneys, and each of them, separately and
collectively ("DCS Indemnitees"), of and from any and all manner of
claims, demands, actions, causes of action, suits, proceedings,
controversies, rights, obligations, liabilities, disputes, amounts due,
debts, contracts, judgments, damages, counterclaims, defenses, set-offs,
credits, known or unknown, asserted or not asserted, of any nature
whatsoever, in law or in equity, whether pursuant to federal or state
securities laws or otherwise (herein collectively referred to as "Claims")
which it ever had, now has or which it or its heirs, representatives,
devisees, legatees, successors or assigns can, shall or may have for or by
any reason of any matter, cause or thing whatsoever relating to or in any
way connected with the Existing Documents, any transaction contemplated by
the Existing Documents or any breach thereof by any DCS Indemnitee prior
to the Closing, including, but not limited to, any services or employment
rendered or not rendered to the Castle Parties. For
15
avoidance of doubt, following the Closing, the Castle Parties acknowledge
that they have no defenses, claims, or other offsets against payment of
the Original Notes, the Partial Settlement Amount, the Full Settlement
Amount, the C Merger Consideration or other amounts owing to the DCS
Parties under the Existing Documents (all of which shall be calculated and
paid in accordance with the terms of the Existing Documents or this
document, as applicable) arising from events occurring prior to the
Closing and agree that they shall not assert any such defense, claim or
offset; provided that the Original Notes remain subject to the
Subordination Agreements. Following the Payment Date, monies owed to, or
incurred in connection with, ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇ (or his affiliates), if any,
shall be the sole obligation of the Castle Parties; provided, that
expenses incurred in connection with the foregoing during the fourth
quarter of 1999 will reduce, pro rata in accordance with their ownership
percentage in Castle West, the amount of Fourth Quarter Earnings payable
to the DCS Parties.
16. Other than the obligations of the respective Parties under this
Agreement and those provisions of the Existing Documents specifically
preserved by this Agreement, all of which shall remain for all purposes in
full force and effect in accordance with their respective terms and
provision (as modified, as applicable, by this Agreement), for and in
consideration of the releases and indemnities set forth herein and entry
into this Agreement and the delivery of the documents required hereby,
effective as of the Closing, each of the DCS Parties does hereby release,
remise and forever discharge each of the Castle Parties and their
respective heirs, successors, assigns, legal and personal representatives,
estates, devisees, legatees, past or present officers, directors,
employees, shareholders, stockholders, parent and subsidiary corporations,
agents, affiliates and their attorneys, and each of them, separately and
collectively ("Castle Indemnitees"), of and from any and all Claims which
it ever had, now has or which it or its heirs, representatives, devisees,
legatees, successors or assigns can, shall or may have for or by any
reason of any matter, cause or thing whatsoever relating to or in any way
connected with the Existing Documents, any transaction contemplated by the
Existing Documents or any breach thereof by any Castle Indemnitee prior to
the Closing. Effective as of the Payment Date, except as otherwise
specifically provided herein to the contrary, each of the DCS Parties does
hereby release, remise and forever discharge each of the Castle
Indemnities of and from any and all Claims which it ever had, now has or
which it or its heirs, representatives, devisees, legatees, successors or
assigns can, shall or may have for or by any reason of any matter, cause
or thing whatsoever relating to or in any way connected with any
obligation to pay the Acquisition Purchase Price Adjustment, the B Merger
Consideration, the C Merger Consideration or any other amounts payable
under the Combination Agreement, the Letter Agreement, the Limited
Liability Company Agreement (other than Fourth Quarter Earnings, which
shall remain payable), the Management
16
Agreement, the Holdings Operating Agreement, the Consulting Agreement or
the Adjustment Obligations.
17. The DCS Parties hereby agree, jointly and severally, to
indemnify and hold harmless the Castle Indemnitees from any and all
Damages suffered by any Castle Indemnitee as a result of, caused by,
arising out of, or in any way relating to any allegations by ▇'▇▇▇▇▇▇▇,
JUL-C Corporation or their respective heirs, representatives, devisees,
legatees, successors or assigns (the "▇'▇▇▇▇▇▇▇ Affiliates") to the effect
that (a) any of the DCS Parties breached, misrepresented the contents of,
or violated any duty owed to any ▇'▇▇▇▇▇▇▇ Affiliate under any Existing
Document or applicable law or (b) any Castle Indemnitee acted in concert
with any DCS Party (in consummating the transactions contemplated by this
Agreement or otherwise) to deprive any ▇'▇▇▇▇▇▇▇ Affiliate of any rights
or value that she or it was entitled to receive under the Existing
Documents.
18. The Parties agree that the transactions contemplated herein
shall be treated for federal, state and local tax purposes as follows, and
agree to report to all tax authorities consistent with this Section 18:
(a) If the Payment Date occurs:
(i) The $300,000 payment made by the Castle Parties on
November 17, 1999 and the Full Settlement Amount shall be
considered payments (x) first, in consideration of the cash
and note portion of the Acquisition Purchase Price Adjustment
applicable to the sale of the Class A Membership Interest in
an amount equal to $336,530; (y) second, in consideration of
the sale of the Class B Membership Interest by DCS to CDC in
an amount equal to $3,663,470; and (z) third, in consideration
of the sale of the Class C Membership interest by Holdings to
CDC in an amount equal to $1,300,000. No amount shall be
considered a payment in connection with amounts described in
Section (D)5 or (D)6 or any other amounts that may otherwise
be due and owing to the DCS Parties under any of the
Outstanding Castle Obligations.
(ii) The amount of Castle West's taxable income
allocable to Holdings for the taxable period ending December
31, 1999 shall be an amount equal to the lesser of (x) twenty
percent of the total amount of Castle West's taxable income or
(y) $200,000. The amount of Castle West's taxable income
allocable to Holdings for the taxable period ending on the
Payment Date shall be zero. No other allocation of taxable
profits, losses or gains of
17
Castle West shall be allocated to Holdings, DCS or any other
DCS Party for either taxable year. To the extent necessary to
give effect to this Section (E)18(a)(ii), this Section
(E)18(a)(ii) shall be considered an amendment to the Limited
Liability Company Agreement.
(iii) The payment of the Fourth Quarter Earnings shall
be treated as a distribution from Castle West to Holdings
under Article 8 of the Limited Liability Company Agreement.
Should the distribution occur after the transfer of the B
Membership Interests and C Membership interests, the parties
shall treat the payment as a payment pursuant to Section
736(b) of the Internal Revenue Code of 1986, as amended (the
"Code").
(b) If the Payment Date does not occur, and the Partial
Settlement Amount is paid on or before February 1, 2000:
(i) The $300,000 payment made by the Castle Parties on
November 17, 1999 and the cash portion of the Partial
Settlement Amount shall be considered a partial payment in
consideration of the cash and note portion of the Acquisition
Purchase Price Adjustment applicable to the sale of the Class
A Membership Interest. No amount shall be considered a payment
in connection with amounts described in Section (D)5 or (D)6
or any other amounts that may otherwise be due and owing to
the DCS Parties under any of the Outstanding Castle
Obligations.
(ii) The amount of Castle West's taxable income
allocable to Holdings for the taxable period ending December
31, 1999 shall be an amount equal to the lesser of (i) twenty
percent of the total amount of Castle West's taxable income or
(ii) $200,000 plus Fourth Quarter Earnings. No other
allocation of taxable profits, losses or gains of Castle West
shall be allocated to Holdings, DCS or any other DCS Party for
the taxable year ending on December 31, 1999. To the extent
necessary to give effect to this Section (E)18(b)(ii), this
Section(E)18(b)(ii) shall be considered an amendment to the
Limited Liability Company Agreement.
(iii) The payment of the Fourth Quarter Earnings shall
be treated as a distribution from Castle West to Holdings
under Article 8 of the Limited Liability Agreement.
18
(c) If the Payment Date does not occur, and the Partial Settlement
Amount is not paid on or before February 1, 2000:
(i) The $300,000 payment made by the Castle Parties on
November 17, 1999 shall be considered a partial payment in
consideration of the cash and note portion of the Acquisition
Purchase Price Adjustment applicable to the sale of the Class
A Membership Interest. All other payments shall be
characterized in accordance with the Castle West Transaction
Documents.
(ii) The amount of Castle West's taxable income
allocable to Holdings for the taxable period ending December
31, 1999 shall be calculated in accordance with the Limited
Liability Company Agreement. Similarly, distributions shall be
calculated and timely made in accordance with the Limited
Liability Company Agreement.
(d) In all events:
(i) Castle West shall be responsible for all filings
required under Code Section 6050K (dealing with filing in
connection with the transfer of a partnership interest).
Castle Dental shall be responsible for the timely filing of
all of the Castle Parties' tax returns consistent with the
terms of this Agreement. Castle Dental shall ensure that the
DCS Parties are notified of any audit of the Castle West tax
returns and are treated as "notice partners" under Code
Section 6231 and Castle Dental shall supply such information
to the Internal Revenue Service as is necessary to assure
notice is given to the DCS Parties pursuant to Code Section
6223 et seq.
(ii) The Parties agree that Castle Dental shall not be
obligated to comply strictly with the tax positions required
by Section (E)18(a) or (b) above in the event that it is
advised by its auditors that such positions are inconsistent
with the positions that Castle Dental is required to make
under the Code; provided that Castle Dental shall take
positions as nearly identical as possible to those required
above that are consistent with its reporting obligations under
the Code and will give the DCS Parties notice of such
determination prior to the filing thereof.
19. Each Party to the Hawthorne Lease and the South Gate Lease
hereby agrees that following the Closing, the New Leases shall remain in
full force and effect as written
19
and as further guaranteed by Castle Dental in accordance with Section
(E)2(c)(ii) above. Each Party to the Burbank Lease hereby agrees that
following the Closing, the Burbank Lease shall remain in full force and
effect as guaranteed by Castle Dental in accordance with Section
(E)2(c)(ii) above. ▇▇▇▇▇▇▇ and the Castle Parties agree to enter into a
new lease in due course on mutually acceptable terms replacing the Burbank
Lease.
20. Each Party hereto specifically waives the benefit of the
provisions of Section 1542 of the Civil Code of the State of California,
as follows:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing
the release, which if known by him must have materially affected his
settlement with the debtor."
21. All Parties hereto expressly understand and acknowledge that it
is possible that unknown losses or claims exist or that present losses may
have been underestimated in amount or severity or that losses or claims
may arise in the future, and such Parties explicitly took that into
account and assumed that risk in determining the amount of consideration
to be paid in connection with the execution of this Agreement, and a
portion of said consideration, having been bargained for between the
Parties with the knowledge of the possibility of such unknown claims, was
given in exchange for a full accord, satisfaction, discharge and release
of all such claims, whether asserted or not, and whether or not now known
or knowable.
22. Each Party hereto represents and warrants to the others that it
has full power and authority to enter into this Agreement on behalf of
itself, its members, managers, officers, directors, employees,
shareholders, stockholders, parent and subsidiary corporations, agents and
affiliates and to perform this Agreement and those provisions of the
Existing Documents specifically preserved by this Agreement in accordance
with their respective provisions, that the representatives executing this
Agreement are duly authorized to execute and deliver this Agreement, and
further represents and warrants that the claims subject to this Agreement
have not been assigned to any person not a Party hereto.
23. Each Party hereto represents and warrants to the others that
this Agreement and those provisions of the Existing Documents specifically
preserved by this Agreement each constitutes a valid and binding agreement
of such Party enforceable against such Party in accordance with its
respective terms, except to the extent that its enforceability may be
subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting the enforcement of creditors' rights generally
and by general equitable principles.
20
24. It is understood and agreed that this Agreement involves the
settlement and compromise of disputed claims, and that the consideration
exchanged is not to be deemed or construed as an admission of liability on
the part of any Party hereto herein released, all of whom deny all
liability and intend merely to avoid further legal action and to buy their
peace.
25. From time to time, whether at or after execution hereof, as and
when requested, the Parties hereto agree to execute, acknowledge and
deliver all such instruments or documents and take such other action as
may be reasonably necessary to effectuate the terms, conditions and
purposes of this Agreement. In addition, at the sole expense of the Castle
Parties, each DCS Party agrees to cooperate and render such assistance as
the Castle Parties reasonably request in connection with the ▇▇▇▇▇▇▇
litigation and any other claims that may be made against any Castle Party
in connection with Castle West's business and operations occurring prior
to the Payment Date, including providing testimony where appropriate.
26. This Agreement shall be binding upon and inure to the benefit of
the Parties hereto and their respective agents, employees,
representatives, members, officers, directors, divisions, subsidiaries,
affiliates, successors in interest, assigns, heirs, shareholders and
stockholders.
27. This Agreement may be executed in any number of counterparts,
which taken together shall constitute one and the same instrument and each
of which shall be considered an original for all purposes. This Agreement
shall not be effective against any Party hereto unless and until all of
the Parties listed on the signature page hereof have executed and
delivered a copy of this Agreement.
28. Each Party hereto agrees to accept the facsimile signature of
the other Parties to this Agreement as evidence of the execution and
delivery of this Agreement. Such facsimile signature will be deemed to be
binding upon the Party sending such facsimile signature.
29. All Parties hereto represent and warrant that no promise,
inducement, representation, warranty or agreement not expressed herein has
been made to them in connection with this Agreement and that this
Agreement and the agreements contemplated hereby constitute the entire
agreement between the Parties hereto pertaining to the subject matter
hereof and supersede all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the Parties pertaining to the
subject matter hereof. No supplement, amendment, alteration, modification,
waiver or termination of this Agreement
21
shall be binding unless executed in writing by the Party against whom such
change is being enforced. The Parties hereto agree that they will make no
claim that this Agreement has been orally altered or modified or otherwise
changed by oral communication of any kind or character.
30. The DCS Parties acknowledge that Castle Dental's existing credit
facilities may not be sufficient to finance Castle Dental's currently
planned level of expenditures for operations and growth and that Castle
Dental is currently in the process of attempting to secure up to an
additional $20 million in subordinated debt financing. In addition, the
DCS Parties acknowledge that management is committed to maximizing Castle
Dental's future shareholder value through whatever appropriate
alternatives may become known to them, including, without limitation, in
connection with the debt placement or otherwise.
31. In the case any one or more of the provisions contained in this
Agreement shall be invalid, illegal, or unenforceable, in any respect, the
validity, legality, and enforceability of the remaining provisions
contained herein and therein or any subsequent application of such
provision shall not in any way be affected thereby. In lieu of any such
invalid, illegal or unenforceable provision, the Parties intend that there
shall be added as part of this Agreement a provision as similar in terms
to such invalid, illegal or unenforceable provision as may be possible and
be valid, legal and enforceable.
32. This Agreement shall be deemed to have been executed and
delivered within California and shall be construed and enforced pursuant
to the laws of the State of California, without giving effect to the
conflicts of laws principles thereof. Any action to enforce, modify or
construe this Agreement shall be brought only in the State or Federal
Courts located in the County of Los Angeles, California and each Party
hereto hereby consents to the personal jurisdiction of such courts for the
purpose of any such action, and agrees that the service of process in any
such action may be made by certified mail to such Party's last known
address, or as otherwise authorized by law or by applicable court rule.
33. The Parties hereto have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party hereto by virtue of the authorship
of any of the provisions of this Agreement. Time is strictly of the
essence in the requirement of notice, performance and any other provision
of this Agreement.
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34. Each Party hereto has made such investigation of the facts
pertaining to this settlement and to this Agreement and all of the matters
pertaining thereto as it deems necessary.
35. All Parties hereto shall preserve the confidentiality of this
Agreement and shall not disclose the existence or terms hereof to anyone
not a Party to this Agreement, an attorney for such a Party or a Party's
accountants and lenders to the extent necessary to inform them of its
financial condition or to prepare tax returns, except to the extent that
such disclosure is required by law or court order.
36. This Agreement is entered into by all Parties hereto freely and
voluntarily, and with and upon the advice of counsel. All Parties hereto
represent and warrant that they have been fully advised by their attorneys
with respect to the advisability of executing this Agreement and with
respect to the meaning of California Civil Code Section 1542.
37. Each term of Section (E) of this Agreement is contractual and
not merely a recital.
38. In the event of any litigation relating to this Agreement, the
prevailing Party shall be entitled to reasonable attorneys' fees and
costs.
39. This Agreement is made and entered into as of the day first
above written in Los Angeles, California.
[THE REMAINDER OF THE PAGE LEFT BLANK]
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If the foregoing accurately reflects your understanding of the agreement
among the Parties hereto, please execute this letter in the space so provided
below, upon which execution this letter shall become a binding and enforceable
agreement of each of the signatories hereto.
CDC OF CALIFORNIA, INC.
By:______________________________________
▇▇▇▇ ▇. ▇▇▇▇▇, Vice President and Chief
Financial Officer
CASTLE DENTAL CENTERS OF CALIFORNIA,
L.L.C.
By:______________________________________
▇▇▇▇ ▇. ▇▇▇▇▇, Vice President and Chief
Financial Officer
CASTLE DENTAL CENTERS, INC.
By:______________________________________
▇▇▇▇ ▇. ▇▇▇▇▇, Vice President and Chief
Financial Officer
CASTLE WEST HOLDINGS, LLC
By:_______________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, D.D.S., a Manager
DENTAL CONSULTING SERVICES, LLC
By:_______________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, D.D.S., a Manager
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DENTAL ADVISORY GROUP, LLC
a Delaware limited liability company
By:______________________________________
▇▇▇▇▇ Brief, Managing Member
__________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, D.D.S., Individually
__________________________________________
▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.M.D., Individually
__________________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.D.S., Individually
__________________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, D.D.S., Individually
JDS-B CORPORATION
By:_______________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, D.D.S., President
SAS-B CORPORATION
By:_______________________________________
▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.M.D., President
MART-B CORPORATION
By:_______________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.D.S., President
25
ES-B CORPORATION
By:_______________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, D.D.S., President
DAG-B CORPORATION
By:_______________________________________
▇▇▇▇▇ Brief, President
JDS-C CORPORATION
By:_______________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, D.D.S., President
SAS-C CORPORATION
By:_______________________________________
▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.M.D., President
MART-C CORPORATION
By:_______________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.D.S., President
EL-S-C CORPORATION
By:_______________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, D.D.S., President
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DAG-C CORPORATION
By:______________________________________
▇▇▇▇▇ Brief, President
▇.▇. ▇▇▇▇▇▇▇▇▇, D.M.D., INC.
By:_______________________________________
▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.M.D., President
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.D.S., INC.
By:_______________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.D.S., President
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, D.D.S., INC.
By:_______________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, D.D.S., President
J & K PARTNERSHIP,
a California general partnership
By:_______________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, D.D.S., Partner
By:_______________________________________
▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.M.D., Partner
27