EXHIBIT 2.1
MASTER CONTRIBUTION AND COMBINATION
AGREEMENT
DATED AS OF JANUARY 30, 1998
BY AND AMONG
CASTLE DENTAL CENTERS, INC.,
CDC OF CALIFORNIA, INC.,
DENTAL CONSULTING SERVICES, LLC,
CASTLE DENTAL CENTERS OF CALIFORNIA, L.L.C.,
CASTLE WEST HOLDINGS, L.L.C.,
EACH OF DCS MEMBERS LISTED ON SCHEDULE A HERETO,
EACH OF THE HOLDINGS MEMBERS,
EACH OF THE CORPORATE B MEMBERS,
AND
EACH OF THE CORPORATE C MEMBERS.
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS...........................................................-3-
1.1 DEFINITIONS....................................................-3-
ARTICLE II
THE CASTLE WEST CAPITALIZATION.......................................-12-
2.1 FORMATION OF CASTLE WEST......................................-12-
2.2 CONTRIBUTION OF ASSETS........................................-12-
2.3 EXCLUDED ASSETS...............................................-13-
2.4 ASSUMPTION OF OBLIGATIONS.....................................-14-
2.5 NONASSIGNABLE CONTRACTS AND LEASES............................-14-
2.6 AGENCY RELATIONSHIP...........................................-14-
ARTICLE III
CLASS A SALE.........................................................-15-
3.1 SALE OF CLASS A ..............................................-15-
3.2 DETERMINATION OF AGGREGATE EBIDTA.............................-15-
3.3 PURCHASE PRICE ADJUSTMENT.....................................-16-
3.4 ACQUISITION PURCHASE PRICE ADJUSTMENTS........................-16-
3.5 DETERMINATION OF BURBANK'S EBIDTA.............................-17-
3.6 BURBANK PRICE ADJUSTMENT......................................-17-
3.7 ALLOCATION OF CASH AND MARKETABLE SECURITIES..................-18-
ARTICLE IV
HOLDINGS CAPITALIZATION..............................................-18-
4.1 FORMATION OF HOLDINGS.........................................-18-
4.2 DISTRIBUTION OF C INTEREST....................................-18-
4.3 CONTRIBUTION OF C INTEREST....................................-18-
ARTICLE V
MEMBERSHIP TRANSFERS.................................................-18-
5.1 TRANSFERS OF MEMBERSHIP INTERESTS IN DCS......................-18-
5.2 TRANSFERS OF MEMBERSHIP INTERESTS IN HOLDINGS.................-18-
ARTICLE VI
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MANAGEMENT AGREEMENT AND INCENTIVE PAYMENT...........................-19-
6.1 MANAGEMENT AGREEMENT..........................................-19-
6.2 POST-CLOSING OPERATIONS.......................................-19-
6.3 INCENTIVE PAYMENT.............................................-19-
ARTICLE VII
CORPORATE B MEMBERS' OPTION..........................................-21-
7.1 CORPORATE B MEMBER'S OPTION TO CAUSE B MERGER.................-21-
7.2 CDC'S OPTION TO CAUSE B MERGER................................-23-
ARTICLE VIII
CORPORATE C MEMBERS' AND CDC'S OPTIONS...............................-23-
8.1 CORPORATE C MEMBER'S OPTION TO CAUSE C MERGER. ...............-23-
8.2. CDC'S CALL OPTION.............................................-29-
ARTICLE IX
REPRESENTATIONS AND WARRANTIES OF DCS................................-31-
9.1 EXISTENCE AND GOOD STANDING...................................-31-
9.2 AUTHORIZATION AND VALIDITY OF AGREEMENT.......................-32-
9.3 OWNERSHIP.....................................................-32-
9.4 CONSENTS AND APPROVALS: NO VIOLATIONS.........................-32-
9.5 SUBSIDIARIES AND AFFILIATES...................................-32-
9.6 FINANCIAL STATEMENTS: NO MATERIAL ADVERSE CHANGE..............-33-
9.7 BOOKS AND RECORDS.............................................-33-
9.8 TITLE TO PROPERTIES: ENCUMBRANCES: CONDITION..................-33-
9.9 REAL PROPERTY.................................................-34-
9.10 LEASES........................................................-34-
9.11 MATERIAL CONTRACTS............................................-34-
9.12 PERMITS.......................................................-34-
9.13 LITIGATION....................................................-35-
9.14 TAXES.........................................................-35-
9.15 INSURANCE.....................................................-36-
9.16 INTELLECTUAL PROPERTIES.......................................-36-
9.17 COMPLIANCE WITH LAWS..........................................-36-
9.18 EMPLOYMENT RELATIONS..........................................-37-
9.19 EMPLOYEE BENEFIT PLANS........................................-37-
9.20 ENVIRONMENTAL LAWS AND REGULATIONS............................-37-
9.21 INTERESTS IN CUSTOMERS. SUPPLIERS. ETC........................-37-
9.22 COMPENSATION OF EMPLOYEES.....................................-38-
9.23 PAYORS........................................................-38-
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9.24 ACCOUNTS RECEIVABLE: ACCOUNTS PAYABLE.........................-38-
9.25 DISCLOSURE....................................................-38-
9.26 BROKER'S OR FINDER'S FEES.....................................-38-
9.27 COPIES OF DOCUMENTS...........................................-38-
9.28 SUBSEQUENT EVENTS.............................................-38-
9.29 ACCOUNTING CONTROLS...........................................-39-
9.30 UNAUTHORIZED USE OF FUNDS.....................................-39-
ARTICLE X
REPRESENTATIONS AND WARRANTIES OF CASTLE AND CDC.....................-39-
10.1 EXISTENCE AND GOOD STANDING: POWER AND AUTHORITY..............-39-
10.2 NO VIOLATIONS.................................................-40-
10.3 CAPITAL STOCK.................................................-40-
10.4 LITIGATION....................................................-41-
10.5 COMPLIANCE WITH LAWS..........................................-41-
10.6 FINANCIAL STATEMENTS..........................................-41-
10.7 SUBSEQUENT EVENTS.............................................-42-
10.8 TITLE TO PROPERTY.............................................-42-
10.9 ACCOUNTING CONTROLS...........................................-42-
10.10 TAXES.........................................................-42-
10.11 NO VIOLATION..................................................-42-
10.12 REGULATORY COMPLIANCE.........................................-43-
10.13 EMPLOYEE RELATIONS............................................-43-
10.14 INTELLECTUAL PROPERTY.........................................-43-
10.15 INSURANCE.....................................................-43-
10.16 UNAUTHORIZED USE OF FUNDS.....................................-43-
10.17 BROKER'S OR FINDER'S FEES.....................................-44-
ARTICLE XI
REPRESENTATIONS AND WARRANTIES OF MEMBERS............................-44-
11.1 AUTHORIZATION AND VALIDITY OF AGREEMENT.......................-44-
11.2 MEMBERSHIP INTERESTS..........................................-44-
11.3 CAPITAL STOCK.................................................-45-
11.4 STATUS OF CORPORATE B MEMBERS AND CORPORATE C MEMBERS.........-45-
11.5 MEMBERSHIP INTERESTS FOLLOWING CONTRIBUTION...................-45-
11.6 CONSENTS AND APPROVALS: NO VIOLATIONS.........................-45-
11.7 LITIGATION....................................................-46-
11.8 COMPLIANCE WITH LAWS..........................................-46-
11.9 INVESTMENT REPRESENTATIONS....................................-46-
11.10 DISCLOSURE....................................................-47-
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ARTICLE XII
CONDITIONS TO OBLIGATIONS OF DCS AND THE MEMBERS
12.1 TRUTH OF REPRESENTATIONS AND WARRANTIES.......................-48-
12.2 PERFORMANCE OF AGREEMENTS.....................................-48-
12.3 NO LITIGATION THREATENED......................................-48-
12.4 GOVERNMENTAL APPROVALS........................................-48-
12.5 PROCEEDINGS...................................................-48-
12.6 SECRETARY'S AND GOOD STANDING CERTIFICATES....................-49-
12.7 REGISTRATION RIGHTS AGREEMENT.................................-49-
12.8 LEGAL OPINION.................................................-49-
12.9 CONSENTS......................................................-49-
12.10 EXHIBITS AND SCHEDULES........................................-49-
12.11 FORMATION OF ENTITIES.........................................-49-
12.12 SHAREHOLDERS' AGREEMENT.......................................-49-
12.13 CASTLE BOARD APPROVAL.........................................-49-
ARTICLE XIII
CONDITIONS TO CASTLE'S AND CDC'S OBLIGATIONS.........................-49-
13.1 TRUTH OF REPRESENTATIONS AND WARRANTIES.......................-49-
13.2 PERFORMANCE OF AGREEMENTS.....................................-50-
13.3 NO LITIGATION THREATENED......................................-50-
13.4 GOVERNMENTAL APPROVALS........................................-50-
13.5 CONSENTS......................................................-50-
13.6 LEGAL OPINION.................................................-50-
13.7 PROCEEDINGS...................................................-50-
13.8 DUE DILIGENCE.................................................-50-
13.9 SECRETARY'S AND GOOD STANDING CERTIFICATES....................-51-
13.10 SHAREHOLDERS' AGREEMENT.......................................-51-
13.11 ACQUISITION OF ASSETS OF THE EXISTING PCS.....................-51-
13.12 NON-COMPETITION AGREEMENT.....................................-51-
13.13 EXHIBITS AND SCHEDULES........................................-51-
13.14 FORMATION OF ENTITIES.........................................-51-
13.15 SUBORDINATION AGREEMENT.......................................-51-
ARTICLE XIV
COVENANTS OF DCS.....................................................-51-
14.1 COOPERATION BY DCS AND THE MEMBERS............................-51-
14.2 CONDUCT OF BUSINESS...........................................-52-
14.3 EXCLUSIVE DEALING.............................................-52-
14.4 REVIEW OF THE ASSETS..........................................-52-
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14.5 ACQUISITION OF ASSETS OF THE EXISTING PCS.....................-52-
14.6 FORMATION OF ENTITIES.........................................-53-
14.7 EXHIBITS AND SCHEDULES........................................-53-
14.8 FURTHER ASSURANCES............................................-53-
14.9 HOLDINGS LIMITED AGREEMENT....................................-53-
ARTICLE XV
COVENANTS OF CASTLE AND CDC..........................................-53-
15.1 COOPERATION BY CASTLE AND CDC.................................-53-
15.2 BOOKS AND RECORDS; PERSONNEL..................................-54-
15.3 FORMATION OF ENTITIES.........................................-54-
15.4 EXHIBITS AND SCHEDULES........................................-54-
15.5 RESERVATION OF SHARES.........................................-54-
15.6 FURTHER ASSURANCES............................................-54-
ARTICLE XVI
TERMINATION..........................................................-55-
16.1 TERMINATION...................................................-55-
16.2 EFFECT ON OBLIGATIONS.........................................-55-
ARTICLE XVII
SURVIVAL AND INDEMNIFICATION.........................................-55-
17.1 INDEMNIFICATION OF DCS........................................-55-
17.2 INDEMNIFICATION OF CASTLE AND CDC.............................-56-
17.3 INDEMNIFICATION OF CASTLE AND CDC.............................-56-
17.4 LIMITATIONS ON INDEMNIFICATION................................-56-
17.5 DEMANDS.......................................................-57-
17.6 RIGHT TO CONTEST AND DEFEND...................................-57-
17.7 COOPERATION...................................................-58-
17.8 RIGHT TO PARTICIPATE..........................................-58-
17.9 PAYMENT OF DAMAGES............................................-58-
17.10 RIGHT OF SETOFF...............................................-58-
17.11 SURVIVAL OF REPRESENTATIONS AND WARRANTIES....................-58-
ARTICLE XVIII
MISCELLANEOUS........................................................-59-
18.1 ENTIRE AGREEMENT..............................................-59-
18.2 SUCCESSORS AND ASSIGNS........................................-59-
18.3 COUNTERPARTS..................................................-59-
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18.4 HEADINGS......................................................-60-
18.5 MODIFICATION AND WAIVER.......................................-60-
18.6 NO THIRD PARTY BENEFICIARY RIGHTS.............................-60-
18.7 EXPENSES......................................................-60-
18.8 NOTICE........................................................-60-
18.9 GOVERNING LAW.................................................-61-
18.10 CONFIDENTIALITY; PUBLICITY....................................-61-
18.11 CONSENT TO JURISDICTION.......................................-61-
18.12 SEVERABILITY..................................................-61-
18.13 ENFORCEMENT...................................................-62-
SCHEDULES
Schedule A List of Members
Schedule B Ownership of DCS and Holdings
Schedule 2.4 Assigned Contracts/Assumed Liabilities
Schedule 9.3 Capitalization
Schedule 9.4 Consents
Schedule 9.5 Subsidiaries and Affiliates
Schedule 9.6 Material Adverse Change/Liabilities
Schedule 9.8 Encumbrances
Schedule 9.9 Real Property
Schedule 9.10 Leased Personal Property
Schedule 9.11 Material Contracts and Proposals
Schedule 9.12 Permits
Schedule 9.13 Litigation
Schedule 9.14 Taxes
Schedule 9.15 Insurance Policies
Schedule 9.16 Intellectual Property
Schedule 9.20 Environmental Matters
Schedule 9.21 Interests in Customers
Schedule 9.22 Employee Compensation
Schedule 9.23 Payors
Schedule 9.24 Accounts Receivable
Schedule 11.2 Options
Schedule 11.6 Consents and Approvals
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EXHIBITS
Exhibit A Castle West Certificate
Exhibit B Castle West Limited Agreement
Exhibit C Notes
Exhibit D Holdings Certificate
Exhibit E Holdings Limited Agreement
Exhibit F B Merger Agreement
Exhibit G C Merger Agreement
Exhibit H Letter of Transmittal
Exhibit I Registration Rights Agreement
Exhibit J Shareholders' Agreement
Exhibit K Noncompetition Agreement
Exhibit L Management Agreement
Exhibit M Initial Purchase Price Calculation
Exhibit N Subordination Agreement
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MASTER CONTRIBUTION AND COMBINATION AGREEMENT
MASTER CONTRIBUTION AND COMBINATION AGREEMENT dated as of January 30,
1998 by and among Castle Dental Centers, Inc., a Delaware corporation
("Castle"), Dental Consulting Services, LLC, a California limited liability
company ("DCS"), Castle Dental Centers of California, L.L.C., a Delaware limited
liability company ("Castle West"), each of the current members of DCS listed on
Schedule A hereto (the "DCS Members"), and each of the other Persons listed
below who are to become parties hereto prior to or at the Closing.
W I T N E S S E T H:
WHEREAS, prior to the Closing, Castle will form CDC of California, Inc.,
a Delaware corporation as a wholly owned subsidiary of Castle ("CDC"), and cause
CDC to enter into and deliver this Agreement; and
WHEREAS, at or prior to the Closing, each DCS Member will form a wholly
owned corporation ("Corporate B Member"), and cause such Corporate B Member to
enter into and deliver this Agreement; and
WHEREAS, at or prior to the Closing, the DCS Members will form Castle
West Holdings, L.L.C., a California limited liability company ("Holdings"), and
cause Holdings to enter into and deliver this Agreement; and
WHEREAS, at or prior to the Closing, prior to or concurrently with
issuing any membership interests in Holdings to Persons other than DCS Members,
the DCS Members shall cause such Persons (collectively referred to herein, along
with the DCS Members in their capacity as Members of Holdings, the "Holdings
Members") to enter into and deliver this Agreement; and
WHEREAS, at or prior to the Closing, each Holdings Member will form a
wholly owned corporation ("Corporate C Member"), and cause such Corporate C
Member to enter into and deliver this Agreement; and
WHEREAS, at or prior to the Closing, CDC and DCS will form Castle Dental
Centers of California, L.L.C., a Delaware limited liability company ("Castle
West"), and cause Castle West to enter into and deliver this Agreement; and
WHEREAS, the DCS Members desire to restructure their ownership
interests in DCS; and
WHEREAS, at the Closing, in exchange for certain membership interests in
Castle West, DCS will contribute the Business (as defined below) to Castle West;
and
WHEREAS, after DCS's contribution of the Business, CDC desires to
acquire the right to acquire additional membership interests in Castle West from
DCS; and
WHEREAS, CDC desires to grant to the Corporate B Members the right to
merge into CDC in exchange for common stock, $.001 par value ("Common Stock") of
Castle; and
WHEREAS, CDC desires to grant to the Corporate C Members the right to
merge into CDC in exchange for shares of Common Stock and/or cash, and the
Corporate C Members desire to grant to CDC the right to merge all of the
Corporate C Members into CDC in exchange for shares of Common Stock and/or cash;
and
WHEREAS, the parties hereto desire to effectuate the foregoing
transactions, each in accordance with the terms set forth herein and in the
documents referenced herein or contemplated hereby;
NOW, THEREFORE, to accomplish the foregoing, the parties hereto agree to
enter into and deliver this Agreement to facilitate the transactions described
below on the terms and conditions herein provided:
1. Upon the terms and subject to the conditions set forth in this
Agreement, Castle West will acquire the Business from DCS in exchange for the
Class A Interest, the Class B Interest and the Class C Interest and CDC will
acquire the Class D Interest in Castle West (such transactions being
collectively referred to as the "Castle West Capitalization").
2. Immediately following the Castle West Capitalization, CDC will
purchase from DCS and DCS will sell to CDC the Class A Interest (the "Class A
Sale") in exchange for cash and Notes (as defined below).
3. Immediately following the Class A Sale, DCS will distribute to the
DCS Members the Class C Interest and the DCS Members will then immediately
contribute the Class C Interest to Holdings in exchange for membership interests
therein (such transactions being collectively referred to as the "Holdings
Capitalization").
4. Immediately following the Holdings Capitalization, each Holdings
Member will contribute his or her entire membership interest in Holdings to the
Corporate C Member owned by him or her and each DCS Member will contribute his
or her entire membership interest in DCS to the Corporate B Member owned by him
or her.
5. Upon the terms and subject to the conditions set forth in this
Agreement, the Corporate B Members as a group will be granted the one-time
right, beginning at least one year after the consummation of the Closing, to
convert their interests in Castle West through a merger of all of the Corporate
B Members into CDC in exchange for the issuance of shares of Common Stock of
Castle.
6. Upon the terms and subject to the conditions set forth in this
Agreement, (a) each Corporate C Member will be granted the one-time right,
beginning at the start of the 25th month after
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the consummation of the Closing, to convert its interest in Castle West into
shares of Common Stock of Castle and/or cash through a merger of its Corporate C
Member into CDC and (b) CDC will be granted the one-time right, beginning at the
start of the 31st month after the consummation of the Closing, to convert the
Corporate C Members interests in Castle West into shares of Common Stock of
Castle and/or cash through a merger of the Corporate C Members into CDC.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby approved, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. As used herein, the following terms have the meanings
set forth below (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"ACCOUNTS RECEIVABLE" all notes and accounts receivable of DCS and the
Existing PCs as of the Closing Date.
"ACCOUNTS PAYABLE" all payables of DCS and the Existing PCs to trade
account and other creditors as of the Closing Date.
"ACQUIRED CLINICS" means each business (or allocated portion thereof)
with which Castle West enters into an MSO agreement during the 12-month period
following the Closing Date and with respect to which an Acquisition Purchase
Price Adjustment is required to be made.
"ACQUISITION LIMITATION" as defined in Section 3.4 hereof.
"ACQUISITION PURCHASE PRICE ADJUSTMENT" as defined in Section 3.4
hereof.
"ADJUSTED AGGREGATE EBITDA" means Aggregate EBITDA plus the Pro Forma
MSO Fees of the Acquired Clinics, subject to the limitations contained in
Section 6.2.
"ADJUSTED PURCHASE PRICE" as defined in Section 3.3 hereof.
"AFFILIATE" with respect to any Person, any other Person directly or
indirectly controlling (including but not limited to the directors and officers
of such Person), controlled by, or under direct or indirect common control with
such Person.
"AGGREGATE EBITDA" as defined in Section 3.2 hereof, subject to the
limitations contained in Section 6.2.
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"AGREED-UPON PROCEDURES" as defined in Section 3.2 hereof.
"AGREEMENT" this Master Contribution and Combination Agreement, as
amended from time to time as provided herein.
"ANNUAL GROWTH RATE" means the compounded annual growth rate in Castle
West's EBITDA (calculated from January 1, 1999) from a base consisting of the
aggregate of (i) DCS's and the Existing PCs' EBITDA for the period from January
1, 1998 until the Closing Date, (ii) Castle West's EBITDA for the period from
the Closing Date until December 31, 1998, and (iii) Pro Forma MSO Fees (or other
results of operations acquired) for each Acquired Clinic and other acquisition
from January 1, 1998 until the date of consummation of such Acquired Clinic or
other acquisition; provided, however, that the parties agree that for purposes
of this calculation, Burbank's 1998 EBITDA shall be deemed to be $300,000,
regardless of its actual results of operations.
"ASSETS" as defined in Section 2.2 hereof.
"ASSIGNED CONTRACTS" as defined in Section 2.4 hereof.
"ASSUMED OBLIGATIONS" as defined in Section 2.4 hereof.
"B MERGER" as defined in Section 7.1 hereof.
"B MERGER AGREEMENT" the merger agreement by and among CDC and the
Corporate B Members in substantially the form of EXHIBIT F attached hereto and
incorporated herein by reference.
"B MERGER CONSIDERATION" as defined in Section 7.1(b) hereof.
"B MERGER NOTICE" as defined in Section 7.1(a) hereof.
"BALANCE SHEET DATE" as defined in Section 9.6 hereof.
"BOOKS AND RECORDS" all books, records, books of account, files and data
(including customer and supplier lists), certificates and other documents
related to the conduct of the business or the ownership of the Assets, including
personnel records and files, except that the Books and Records shall not include
(a) any books, records, files and other data of DCS or the Existing PCs which
relate exclusively to organizational and corporate governance proceedings of DCS
or the Existing PCs or (b) any Books and Records which would be included in the
Excluded Assets.
"BURBANK" ▇.▇. ▇▇▇▇▇▇▇▇▇, DMD, Inc., a California professional
corporation d.b.a. Burbank Dental.
"BURBANK ADJUSTMENT" as defined in Section 3.6 hereof.
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"BURBANK REPORTS" as defined in Section 3.5 hereof.
"BURBANK'S 1998 EBITDA" will be equal to Burbank's earnings for the
12-month period ending on March 31, 1999, determined in accordance with GAAP
adjusted to reverse charges thereto made for interest, federal and state income
and franchise taxes, depreciation and amortization, to the extent included in
the calculation of earnings.
"BUSINESS" the practice management of dentistry, including orthodontics
and periodontics and all other management and related activities currently
conducted by DCS and the Existing PCs.
"C MERGER" as defined in Section 8.1 hereof.
"C MERGER AGREEMENT" the merger agreement by and between CDC and each
Corporate C Member in substantially the form of EXHIBIT G attached hereto and
incorporated herein by reference.
"C MERGER CONSIDERATION" as defined in Section 8.1(c) hereof.
"C MERGER NOTICE" as defined in Section 8.1(a) hereof.
"CALL NOTICE" as defined in Section 8.2(c) hereof.
"CAPITAL COST RATE" as defined in Section 6.2 hereof
"CASTLE" as defined in the preamble of this Agreement.
"CASTLE INDEMNITEES" as defined in Section 17.2 hereof.
"CASTLE WEST" as defined in the preamble of this Agreement.
"CASTLE WEST CAPITALIZATION" as defined in the preamble of this
Agreement.
"CASTLE WEST CERTIFICATE" the certificate of formation of Castle West in
substantially the form attached hereto as EXHIBIT A and incorporated herein by
this reference.
"CASTLE WEST DEBT" as defined in Section 8.1(c), subject to the
limitation contained in Section 6.2.
"CASTLE WEST LIMITED AGREEMENT" the limited liability company agreement
of Castle West in substantially the form attached hereto as EXHIBIT B and
incorporated herein by this reference.
"CDC" as defined in the preamble of this Agreement.
"CDC APPROVED EXPANSION" as defined in Section 3(b) of the Management
Agreement.
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"CDC'S CALL OPTION" as defined in Section 8.2.
"CEILING AMOUNT" as defined in Section 17.4 hereof.
"CLAIM" as defined in Section 17.5 hereof.
"CLASS A SALE" as defined in the preamble of this Agreement.
"CLASS A INTEREST" the Class A Member Interest in Castle West created by
the Castle West Limited Agreement.
"CLASS B INTEREST" the Class B Member Interest in Castle West created by
the Castle West Limited Agreement.
"CLASS C INTEREST" the Class C Member Interest in Castle West created by
the Castle West Limited Agreement.
"CLASS D INTEREST" the Class D Member Interest in Castle West created by
the Castle West Limited Agreement.
"CLASS III REPURCHASE OBLIGATION" means the amount of any outstanding
obligation, if any, of Holdings to the former holder of the Class III Interest
in Holdings (as defined in the Holdings Limited Agreement) arising out of the
previous exercise of Holding's option to purchase the Class III Interest
pursuant to Section 5.5(c) of the Holdings Limited Agreement.
"CLOSING" as defined in Article XII hereof.
"CLOSING DATE" as defined in Article XII hereof.
"CODE" the Internal Revenue Code of 1986, as amended from time to time,
and the regulations promulgated and rulings issued thereunder. Section
references to the Code are to the Code as in effect at the date of this
Agreement and any subsequent provisions of the Code amendatory thereof,
supplemental thereto or substituted therefor.
"COMMISSION" the Securities and Exchange Commission.
"COMMON STOCK" the common stock, $.001 par value, of Castle.
"COMMON STOCK VALUE" shall mean the average closing price per share of
the Common Stock on the ten trading days immediately prior to the Closing Date;
provided, however, if such average closing price per share is (i) equal to or
more than $11.00 but no more than $13.96, the Common Stock Value shall be
$12.48, (ii) less than $11.00, the Common Stock Value shall be $11.00, and (iii)
more than $13.96, the Common Stock Value shall be $13.96.
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"CORPORATE B MEMBERS" as defined in the preamble of this Agreement.
"CORPORATE B MEMBERS' MERGER OPTION" as defined in Section 7.1 hereof.
"CORPORATE C MEMBERS" as defined in the preamble of this Agreement.
"CORPORATE C MEMBER'S MERGER OPTION" as defined in Section 8.1.
"DAMAGES" as defined in Section 17.1 hereof.
"DCS" as defined in the preamble.
"DCS INDEMNITEES" as defined in Section 17.1 hereof.
"DCS MEMBERS" as defined in the preamble of this Agreement.
"EBITDA" as defined in Section 8.1(c), subject to the limitations
contained in Section 6.2.
"EBTDA" as defined in Section 6.3, subject to the limitations contained
in Section 6.2.
"ENCUMBRANCES" liens, security interests, options, rights of first
refusal, easements, mortgages, charges, debentures, indentures, deeds of trust,
rights-of-way, restrictions, agreements, encroachments, licenses, leases,
permits, security agreements, or any other encumbrances and other restrictions
or limitations on use of real or personal property or irregularities in title
thereto, except as to any restrictions under federal or state securities laws.
"ENVIRONMENTAL CLAIM" any and all administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of noncompliance
or violations, investigations or proceedings relating in any way to any
Environmental Law (for purposes of this definition, "Claims") or any Permit
issued under any such Environmental Law, including without limitation (i) any
and all Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, remediation or other actions of damages pursuant to any
applicable Environmental Law and (ii) any and all Claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
"ENVIRONMENTAL LAW" any federal, state or local statute, law, rule,
regulation, ordinance. code, policy or rule of common law now in effect and in
each case as amended and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment,
relating to Hazardous Materials, the environment or health relating to or
arising from environmental conditions, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended 42 U.S.C. ss. 9601 ET SEQ.; the Hazardous Materials Transportation
Act, as amended, 49 U.S.C. ss. 1801 ET SEQ.; the Resource Conservation and
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Recovery Act, as amended, 42 U.S.C. ss. 6901 ET SEQ.; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. ss. 1251 ET SEQ.; the Toxic
Substances Control Act, 15 U.S.C. ss. 2601 ET SEQ.; the Clean Air Act, 42 U.S.C.
ss. 7401 ET SEQ.; the Safe Drinking Water Act, 42 U.S.C. ss. 3808 ET SEQ,.; the
Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 ET SEQ.; and relevant state and
local laws.
"ERISA" the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to ERISA are to ERISA as in effect at the date of
this Agreement and any subsequent provisions of ERISA amendatory thereof,
supplemental thereto or substituted therefor.
"EXCHANGE ACT" the Securities Exchange Act of 1934, as amended.
"EXCLUDED ASSETS" as defined in Section 2.3 hereof.
"EXCLUDED LIABILITIES" as defined in Section 2.4 hereof.
"EXISTING PCS" means ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, DDS, Inc., a California
professional corporation d.b.a. Hawthorne Family Dental Group; ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
DDS, Inc., a California professional corporation d.b.a. Broadway Dental; ▇▇▇▇▇▇
▇▇▇▇▇▇▇, DDS, Inc., a California professional corporation d.b.a. South Gate
Dental Center; ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, DDS, Inc., a California professional corporation
d.b.a. Lincoln Dental Center; and Burbank.
"FINANCIAL REPORTS" as defined in Section 3.2 hereof.
"FINANCIAL STATEMENTS" as defined in Section 9.6 hereof.
"GAAP" generally accepted accounting principles consistently applied.
"HAZARDOUS MATERIALS" (i) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing levels of polychlorinated biphenyls, and radon gas;
(ii) any chemicals, materials or substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "contaminants" or "pollutants," or words of similar import
under any applicable Environmental Law; and (iii) any other chemical, material
or substance, exposure to which is prohibited, limited or regulated by any
governmental authority because it is hazardous or toxic.
"HOLDINGS" as defined in the preamble of this Agreement.
"HOLDINGS CERTIFICATE" the certificate of formation of Holdings in
substantially the form attached hereto as EXHIBIT D and incorporated herein by
this reference.
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"HOLDINGS CAPITALIZATION" as defined in the preamble of this Agreement.
"HOLDINGS INDEBTEDNESS" means, at the time of determination, all
outstanding indebtedness of Holdings to any Person, including, without
limitation, the Class III Repurchase Obligation. In no event shall CDC, as a
Member of Holdings, be deemed to have any interest in or direct or indirect
obligation to pay the Holdings Indebtedness.
"HOLDINGS LIMITED AGREEMENT" the limited liability company agreement of
Holdings in substantially the form attached hereto as EXHIBIT E and incorporated
herein by this reference.
"HOLDINGS MEMBERS" as defined in the preamble of this Agreement.
"HOLDINGS NEW VALUE" as defined in Section 8.1(c) hereof, subject to the
limitation contained in Section 6.2.
"HOLDINGS OLD VALUE" as defined in Section 8.1(c) hereof, subject to the
limitation contained in Section 6.2.
"INCENTIVE PAYMENT" as defined in Section 6.3 hereof, subject to the
limitation contained in Section 6.2.
"INCREMENTAL EBITDA" as defined in Section 8.1(c) hereof, subject to the
limitations contained in Section 6.2.
"INITIAL PURCHASE PRICE" as defined in Section 3.1 hereof.
"INTELLECTUAL PROPERTY" domestic and foreign patents, patent
applications, registered and unregistered trademarks, service marks, trade names
and logos, registered and unregistered copyrights, computer programs, data
bases, trade secrets and proprietary information relating to the conduct of the
Business.
"LETTER OF TRANSMITTAL" means a Letter of Transmittal executed by each
stockholder in a Corporate B Member or Corporate C Member, as applicable, in
substantially the form attached hereto as EXHIBIT H and incorporated herein by
this reference.
"MANAGEMENT AGREEMENT" means the management agreement between Castle
West and Holdings in substantially the form attached hereto as EXHIBIT L and
incorporated herein by this reference.
"MATERIAL ADVERSE EFFECT" material adverse effect on the assets,
liabilities, business, condition (financial or otherwise), or results of
operations of (i) DCS and the Existing PCs, taken as a whole, or (ii) CDC and
Castle, taken as a whole, as appropriate.
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"MEMBERS" the DCS Members, the Holdings Members, the Corporate B Members
and the Corporate C Members.
"NONCOMPETITION AGREEMENT" means a Confidentiality and Noncompetition
Agreement between Castle and each DCS Member in substantially the form attached
hereto as EXHIBIT K and incorporated herein by this reference.
"NOTES" means the Subordinated Promissory Notes of Castle in
substantially the form attached hereto as EXHIBIT C and incorporated herein by
this reference.
"ORIGINAL REGISTRATION RIGHTS AGREEMENT" as defined in Section 10.2
hereof.
"PERMITS" as defined in Section 9.12 hereof.
"PERMITTED ENCUMBRANCES" as defined in Section 9.8 hereof.
"PERSON" any individual, partnership, joint venture, corporation,
limited liability company, trust, unincorporated organization, government or
other department or agency thereof or other entity.
"PLANS" as defined in Section 9.19 hereof.
"PRE-CLOSING PERIODS" as defined in Section 9.14(a) hereof.
"PRO FORMA MSO FEES" means, with respect to any Acquired Clinic, the MSO
fees (determined based upon actual operating results) that would have been paid
to Castle West (over the 12-month period ending prior to the acquisition with
respect to which the Acquired Clinic was valued by Castle West and the Acquired
Clinic for purposes of Castle West's acquisition thereof) if the MSO agreement
with respect to such Acquired Clinic had been in effect at the beginning of such
period.
"PRO RATA SHARE" means, (a) with respect to a DCS Member's or Corporate
B Member's interest in the Initial Purchase Price, the Adjusted Purchase Price
and each Acquisition Purchase Price Adjustment, such Member's percentage thereof
set forth on Schedule A-1, (b) with respect to a DCS Member's or Corporate B
Member's interest in the B Merger Consideration, such Member's percentage
thereof set forth on Schedule A-2 (subject to adjustment to reflect permitted
changes in ownership following the Closing), (c) with respect to a Corporate C
Member's or Holdings Member's interest in the Incentive Payment, the Holdings
New Value, the Holdings Old Value or the Holdings Indebtedness, such Corporate C
Member's or Holdings Member's ownership percentage therein set forth on Schedule
A-3 (subject to adjustment to reflect permitted changes in ownership following
the Closing), and (d) with respect to a Member's share in the Ceiling Amount,
the aggregate of such Member's interest in each of (a), (b) and (c) above
divided by the aggregate of all of the Members' interests in (a), (b) and (c)
above.
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"PROPERTY" any real property and improvements thereon presently owned,
leased, operated or occupied by DCS or the Existing PCs (other than any of the
foregoing included in Excluded Assets).
"PROFESSIONAL" as defined in Section 9.12 hereof.
"PROSPECTUS" as defined in Section 11.10 hereof.
"RECAPITALIZATION TRANSACTION" as defined in Section 7.1(e) hereof.
"REGISTRATION RIGHTS AGREEMENT" means that Registration Rights Agreement
between Castle and each of the Holdings Members and DCS Members in substantially
the form attached hereto as EXHIBIT I and incorporated herein by reference.
"RELEASE" disposing, discharging, injecting, spilling, leaking,
leaching, dumping, emitting, escaping, emptying, seeping, placing and the like,
into or upon any land or water or air, or otherwise entering into the
environment.
"RETURNS" as defined in Section 9.14(a) hereof.
"SECURITIES ACT" as defined in Section 11.9 hereof.
"SHARE LIMITATION" as defined in Section 8.1(c) hereof.
"SHARE VALUE" as defined in Section 8.1(c) hereof.
"SHAREHOLDERS' AGREEMENT" means the shareholders agreement to be entered
into between Castle West, CDC, DCS, Holdings and each of the Members in
substantially the form attached hereto as EXHIBIT J and incorporated herein by
this reference.
"SUBORDINATION AGREEMENT" the subordination agreement by and between
NationsBank of Texas, N.A., as agent, on behalf of each of Castle's lenders,
Castle and DCS in substantially the form of EXHIBIT N attached hereto and
incorporated herein by reference.
"TAX" any net income, alternative or add-on minimum tax, advance,
corporation, gross income, gross receipts, sales, use, ad valorem, franchise,
profits, license, value added, withholding, payroll, employment, excise, stamp
or occupation tax, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest or any penalty imposed by any
governmental authority with respect thereto, and any liability for such amounts
as a result either of being a member of an affiliated group or of a contractual
obligation to indemnify any other entity.
"TERRITORY" as defined in Section 6.2 hereof.
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"▇▇▇▇ ▇▇▇▇▇▇" ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, a general partnership d.b.a. West
Valley Dental.
ARTICLE II
THE CASTLE WEST CAPITALIZATION
2.1 FORMATION OF CASTLE WEST. Prior to Closing, CDC shall cause the
Castle West Certificate to be filed with the Delaware Secretary of State.
Immediately following the execution of this Agreement, CDC and DCS shall enter
into and deliver the Castle West Limited Agreement which shall provide for the
issuance of the Class A Interest, the Class B Interest, the Class C Interest and
the Class D Interest. The Class D Interest shall be issued to CDC in exchange
for the consideration therefor contemplated by the Castle West Limited
Agreement.
2.2 CONTRIBUTION OF ASSETS. Subject to the terms and conditions of
Article XII, DCS agrees to contribute to Castle West, on the Closing Date as
part of the Closing, in exchange for the issuance of the Class A Interest, the
Class B Interest and the Class C Interest, the Assets, free and clear of any
Encumbrances except Permitted Encumbrances. The contribution of the Assets is
intended to be a tax free contribution pursuant to Code Section 721. The term
"Assets" shall mean all of the rights, title and interests of DCS in and to the
assets used in or relating to the conduct of the Business on the Closing Date
(assuming that DCS has acquired the Assets of the Existing PCs immediately prior
to the Closing Date), tangible and intangible, real, personal and mixed,
wheresoever situated and whether or not specifically referred to herein or in
any instrument of conveyance delivered pursuant hereto, other than the Excluded
Assets. The Assets shall include but are not limited to the following categories
of assets:
(a) DCS's title to, interest in or rights under the leases of
Property described in SCHEDULE 9.9 attached hereto together with all
buildings, facilities, fixtures and other leasehold improvements thereon
and all easements, rights-of-way, transferable licenses and Permits and
other appurtenances thereof;
(b) plant, machinery, equipment, operating equipment, tools,
supplies, inventories, furniture, fixtures, furnishings, vehicles and
other fixed assets owned or leased (as to such leasehold interest) by
DCS and used or held for use in the conduct of the Business;
(c) contracts, documents, instruments and general intangibles of
DCS, including the name "Dental Consulting Services" and derivatives
thereof, and goodwill associated therewith;
(d) Accounts Receivable as of the Closing Date; provided,
however, that DCS shall be entitled to retain (and Castle West shall be
required to remit to DCS as soon as practicable) the proceeds of
collections after the Closing Date of Accounts Receivable generated on
or before December 31, 1997, but only if and to the extent aggregate
collections
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of Accounts Receivable by Castle West during the months of April, May
and June, 1998 equal or exceed DCS's aggregate collections of Accounts
Receivable during the months of April, May and June, 1997;
(e) all licenses, Permits, registrations and authorizations,
proprietary information, methods, know-how, designs, processes,
procedures, goodwill and all rights held by DCS to other Intellectual
Property;
(f) Books and Records;
(g) any rights of DCS pertaining to any counterclaims, set-offs
or defenses it may have with respect to any Assumed Obligations;
(h) all prepaid claims, prepaid taxes, prepaid insurance premiums
and other prepaid expense items;
(i) third-party indemnities, policies of insurance, fidelity,
surety or similar bonds and the coverages afforded thereby relating to
the Business; and
(j) cash, cash equivalents, deposits, advance payments,
securities, letters of credit naming DCS as account party, certificates
of deposit, notes, drafts, checks and similar instruments.
2.3 EXCLUDED ASSETS. The Assets shall not include any of the
following (the "Excluded Assets"):
(a) any license, patient record or other property that must,
under applicable law, be owned by an individual licensed to practice
dentistry or an entity owned solely by persons licensed to practice
dentistry;
(b) any contract for the employment of an individual licensed to
practice dentistry;
(c) any real property other than leasehold interests of DCS in
real property occupied by the Business pursuant to leases described in
SCHEDULE 9.9;
(d) undistributed profits of DCS permitted to be distributed
hereby at or prior to Closing;
(e) other than DCS's leasehold interest therein, any plant,
machinery, equipment, operating equipment, tools, supplies, inventories,
furniture, fixtures, furnishings, vehicles and other fixed assets leased
by DCS;
(f) minute books and governance documents of DCS and the Existing
PCS; or
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(g) any and all interests in, benefits from or assets of West
Valley, including, without limitation, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, D.D.S., Inc.'s
partnership interest therein (including, without limitation, any
economic benefit arising therefrom), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, D.D.S.'s consulting
agreement therewith (including, without limitation, the economic
benefits arising therefrom) and any agreement transferring or purporting
to transfer, in any way, any interest in any of the foregoing to DCS,
any Existing PC or any other Member.
2.4 ASSUMPTION OF OBLIGATIONS. Upon the contribution of the Assets by
DCS, Castle West shall assume and agree to pay, perform and discharge, in a
timely manner and in accordance with the terms thereof, only such of the
obligations of DCS in respect of (a) the licenses, leases, Permits, contracts,
notes and other debts set forth in SCHEDULE 2.4 (the "Assigned Contracts") which
are being assigned to Castle West hereunder, (b) Accounts Payable, (c) the long
term debt set forth on SCHEDULE 2.4 and (d) other liabilities disclosed in the
Financial Statements (including the footnotes thereto) or otherwise arising in
the ordinary course of business from the Balance Sheet Date (collectively,
"Assumed Obligations"). Notwithstanding anything contained herein to the
contrary, Castle West does not assume, and hereby expressly disclaims
responsibility for, any obligation or liability of DCS or the Existing PCs
("Excluded Liability") that is (x) not described in (a), (b), (c) or (d) above,
(y) arises out of any Tax imposed upon the Business, DCS, the DCS Members, the
Existing PCs or the owners of the Existing PCs, if such liability or obligation
relates to any period ending prior to the Closing Date or arises as a result of
the consummation of DCS's acquisition of the Assets of the Existing PCs or DCS's
contribution of the Assets to Castle West or (z) relates to or arises out of the
unusual and non-recurring expenses incurred in connection with the transactions
contemplated by this Agreement.
2.5 NONASSIGNABLE CONTRACTS AND LEASES. In the case of any material
Assigned Contracts which are not by their terms assignable or with respect to
which a consent to assignment is not obtained by the Closing Date, DCS agrees to
use reasonable efforts to obtain, or cause to be obtained, prior to the Closing
Date, any written consents necessary to convey to Castle West the benefit
thereof. Castle West shall cooperate with DCS, in such manner as may be
reasonably requested, in connection therewith, including without limitation,
active participation in visits to and meetings, discussions and negotiations
with all Persons with the authority to grant or withhold consent. If DCS is
unable to obtain such necessary written consents for the remaining term of such
Assigned Contract, Castle West shall act as DCS's agent in the performance of,
and shall be responsible for, all obligations and liabilities under such
Assigned Contract and DCS shall act as Castle West's agent in the receipt of any
benefits, rights or interests which inure to DCS under such Assigned Contract.
2.6 AGENCY RELATIONSHIP. In the event that, following the Closing Date,
DCS receives any funds, documents or instruments which constitute or are
delivered in respect of Assets transferred to Castle West pursuant to this
Agreement, DCS agrees to hold such funds, documents or instruments in trust for
Castle West and as Castle West's agent therefor.
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ARTICLE III
CLASS A SALE
3.1 SALE OF CLASS A INTEREST. Contemporaneously with the Castle West
Capitalization, CDC agrees to purchase from DCS, and DCS agrees to sell, convey,
transfer, assign and deliver, and cause to be sold, conveyed, transferred,
assigned and delivered, to CDC against the receipt by DCS of a wire transfer of
immediately available funds in the amount of Eleven Million Two Hundred
Twenty-Two Thousand Six and No/100 Dollars ($11,222,006) and the delivery of
Notes in the original principal amount of Two Million Eight Hundred Five
Thousand Five Hundred Two and No/100 Dollars ($2,805,502) (in the aggregate, the
"Initial Purchase Price"), 100% of the Class A Interest, free and clear of any
Encumbrances.
3.2 DETERMINATION OF AGGREGATE EBIDTA. On or prior to the 60th day
following the Closing Date, DCS's independent public accountants shall prepare
an income statement and statement of cash flows for DCS and the Existing PCs for
the year ended December 31, 1997, and a balance sheet for DCS and the Existing
PCs at December 31, 1997 prepared in a manner consistent with the past practices
of DCS (collectively, the "Financial Reports"), and deliver the Financial
Reports to CDC's independent public accountants. CDC's independent public
accountants shall perform such procedures as shall be agreed upon between CDC
and such independent public accountants ("Agreed-Upon Procedures") regarding the
Financial Reports (including any corresponding work papers of DCS's independent
public accountants) and prepare and deliver a written report with respect to any
disagreement CDC's independent public accountants may have with regard to the
treatment or amount of any item in the Financial Reports affecting EBITDA within
15 days of receipt thereof. If DCS's independent public accountants and CDC's
independent public accountants cannot resolve such disagreement within 15 days
after DCS's independent public accountants receipt of such report, then they
shall so notify DCS and CDC, and DCS and CDC shall attempt to resolve the
discrepancy within 15 days of such notice. If DCS and CDC cannot resolve the
disagreement to their mutual satisfaction, another independent public accounting
firm reasonably acceptable to DCS and CDC shall be retained to resolve the
disagreement regarding the Financial Reports. Such firm's conclusions as to the
resolutions of disputed matters for purposes of determining the Aggregate EBITDA
shall be conclusive. DCS and CDC shall share equally in the expenses of
retaining such third independent accounting firm. CDC shall pay the expenses of
CDC's independent public accountants for their work regarding the Financial
Reports and related matters, and DCS shall pay the expenses of DCS's independent
public accountants for their work regarding the Financial Reports and related
matters. Based upon the Financial Reports, CDC and DCS shall determine the
Aggregate EBITDA of DCS. The Aggregate EBITDA shall be determined consistent
with the methods used by DCS's independent public accountants in preparing the
Financial Statements described in Section 9.6 hereof. The "Aggregate EBITDA"
shall be equal to (a) the pro forma aggregate earnings of DCS and the Existing
PCs for the year ended December 31, 1997, adjusted to reverse charges thereto
made for interest, federal and state income and franchise taxes, depreciation
and amortization (such amounts to be
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determined based upon actual 1997 performance as if any portion of any Existing
PC not owned by DCS on January 1, 1997, were acquired by DCS on January 1,
1997), plus (b) an amount equal to the unusual and non-recurring expenses
incurred during 1997 in connection with the transactions contemplated by this
Agreement to the extent that they were deducted in determining earnings, and an
adjustment for (c) any difference between the 1997 operations of DCS and
anticipated Castle West operations in 1998 related either to compensation paid
to the DCS Members and other DCS employees or increased expenses related to
additional staffing necessary to operate the Acquired Clinics (with any increase
in 1998 levels to reduce Aggregate EBITDA and any decrease in 1998 levels to
increase Aggregate EBITDA) as agreed upon by Castle and DCS; provided, however,
that for purposes of calculating Aggregate EBITDA, the 1997 pro forma EBITDA for
Burbank shall be deemed to be $300,000, regardless of Burbank's actual results
of operations. A worksheet detailing the method DCS and Castle used to calculate
Aggregate EBITDA for purposes of calculating the Initial Purchase Price is
attached hereto as EXHIBIT M. Subsequent calculations of Aggregate EBITDA shall
be made in accordance with the method shown on EXHIBIT M.
3.3 PURCHASE PRICE ADJUSTMENT. Immediately following the determination
of Aggregate EBITDA in accordance with Section 3.2, the parties shall determine
whether the Initial Purchase Price should be adjusted (the "Adjusted Purchase
Price"). In order to determine the Adjusted Purchase Price, the parties shall
multiply the Aggregate EBITDA by 60%, then shall multiply the resulting number
by 6.5 (the initial purchase multiple). If the Adjusted Purchase Price is less
than the Initial Purchase Price, within 15 days of such determination DCS shall
deliver or cause to be delivered to CDC cash in the amount of 80% of the
difference between the Initial Purchase Price and the Adjusted Purchase Price
and shall return all Notes previously delivered hereunder to Castle so that the
aggregate original principal amount thereof may be reduced by 20% of the
difference between the Initial Purchase Price and the Adjusted Purchase Price.
Castle hereby agrees to deliver to DCS Notes in an amount equal to 20% of the
Adjusted Purchase Price in exchange for the Notes tendered by DCS in the
previous sentence. If the Adjusted Purchase Price is more than the Initial
Purchase Price, within 15 days of such determination CDC shall wire transfer to
DCS immediately available funds and deliver to DCS Notes in the original
principal amount of, 80% and 20%, respectively, of the difference between the
Adjusted Purchase Price and the Initial Purchase Price.
3.4 ACQUISITION PURCHASE PRICE ADJUSTMENTS. During the 12-month period
following the Closing Date, the Adjusted Purchase Price shall be increased from
time to time (each an "Acquisition Purchase Price Adjustment") by (a) 6.5 times
60% of the Pro Forma MSO Fees of each business which becomes an Acquired Clinic
during such period minus (b) 60% of the purchase price of such Acquired Clinic.
An Acquisition Purchase Price Adjustment shall be made with respect to each
business with which Castle West enters into an MSO agreement during such period;
provided, however, that notwithstanding the foregoing, no Acquisition Purchase
Price Adjustment shall be made with respect to Pro Forma MSO Fees of any
business to the extent the Pro Forma MSO Fees of such business plus the Pro
Forma MSO Fees of all other previously acquired or simultaneously acquired
Acquired Clinics exceeds $1,500,000 (the "Acquisition Limitation"); provided
further, that Castle West may acquire West Valley during the 12-month period
following the Closing Date and treat West Valley as an Acquired Clinic
notwithstanding the Acquisition Limitation, and the Pro
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Forma MSO Fees of West Valley shall not be counted against or in any reduce the
Acquisition Limitation. To the extent that the Pro Forma MSO Fees of any
business, when aggregated with the Pro Forma MSO Fees of all other previously
acquired or simultaneously acquired Acquired Clinics, cause Pro Forma MSO Fees
to exceed the Acquisition Limitation, the Acquisition Purchase Price Adjustment
shall include (a) such portion of the Pro Forma MSO Fees of such business that
becomes an Acquired Clinic that, when aggregated with the Pro Forma MSO Fees of
all other previously acquired or simultaneously acquired Acquired Clinics,
causes Pro Forma MSO Fees to equal the Acquisition Limitation and (b) the
corresponding pro rata portion of the purchase price of such business that
becomes an Acquired Clinic. Within 15 days of the closing date of the
acquisition of each such Acquired Clinic, CDC shall wire transfer to each DCS
Member immediately available funds equal to, and deliver to each DCS Member
Notes in the original principal amount of, such DCS Member's pro rata share
(which, for purposes of this sentence only, shall be 20% for each DCS Member) of
80% and 20%, respectively, of the Acquisition Purchase Price Adjustment with
respect to such acquisition.
3.5 DETERMINATION OF BURBANK'S EBIDTA. On or prior to June 1, 1999, the
DCS Members' independent public accountants shall prepare an income statement
and statement of cash flows for Burbank for the 12-month period ended March 31,
1999, and a balance sheet for Burbank at March 31, 1999 prepared in accordance
with GAAP (collectively, the "Burbank Reports"), and deliver the Burbank Reports
to CDC's independent public accountants. CDC's independent public accountants
shall perform Agreed-Upon Procedures regarding the Burbank Reports (including
any corresponding work papers of the DCS Members' independent public
accountants) and prepare and deliver a written report with respect to any
disagreement CDC's independent public accountants may have with regard to the
treatment or amount of any item in the Burbank Reports affecting Burbank's 1998
EBITDA within 15 days of receipt thereof. If the DCS Members' independent public
accountants and CDC's independent public accountants cannot resolve such
disagreement within 15 days after the DCS Members' independent public
accountants receipt of such report, then they shall so notify the DCS Members
and CDC, and the DCS Members and CDC shall attempt to resolve the discrepancy
within 15 days of such notice. If the DCS Members and CDC cannot resolve the
disagreement to their mutual satisfaction, another independent public accounting
firm reasonably acceptable to the DCS Members and CDC shall be retained to
resolve the disagreement regarding the Burbank Reports. Such firm's conclusions
as to the resolutions of disputed matters for purposes of determining Burbank's
1998 EBITDA shall be conclusive. The DCS Members and CDC shall share equally in
the expenses of retaining such third independent accounting firm. CDC shall pay
the expenses of CDC's independent public accountants for their work regarding
the Burbank Reports and related matters, and the DCS Members shall pay the
expenses of the DCS Members' independent public accountants for their work
regarding the Burbank Reports and related matters. Based upon the Burbank
Reports, CDC and the DCS Members shall determine Burbank's 1998 EBITDA.
3.6 BURBANK PRICE ADJUSTMENT. If Burbank's 1998 EBITDA, determined in
accordance with Section 3.5, is less than $300,000, the Purchase Price shall be
further adjusted (the "Burbank
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Adjustment"). The Burbank Adjustment shall be equal to 6.5 times 80% of the
difference between Burbank's 1998 EBITDA and $300,000. Within 15 days of such
determination each DCS Member shall return all Notes previously delivered
hereunder to Castle so that the aggregate original principal amount thereof may
be reduced by such Member's Pro Rata Share of the Burbank Adjustment. Castle
hereby agrees to deliver to each DCS Member as soon as practicable a Note in an
amount equal to the Notes tendered by such DCS Member in the previous sentence
less such DCS Member's Pro Rata Share of the Burbank Adjustment.
3.7 ALLOCATION OF CASH AND MARKETABLE SECURITIES. To the extent any cash
or marketable securities are contributed to Castle West, it is agreed that only
Class A Interests shall be received in consideration therefor.
ARTICLE IV
HOLDINGS CAPITALIZATION
4.1 FORMATION OF HOLDINGS. Prior to Closing, DCS shall cause the
Holdings Certificate to be filed with the Delaware Secretary of State.
Immediately following the Class A Sale, each Holdings Member shall enter into
and deliver the Holdings Limited Agreement which shall provide for the issuance
of membership interests therein in exchange for the Class C Interest.
4.2 DISTRIBUTION OF C INTEREST. Immediately following the Class A Sale,
DCS shall distribute to each of the DCS Members such member's pro rata share of
the Class C Interest, free and clear of any Encumbrances.
4.3 CONTRIBUTION OF C INTEREST. Immediately following DCS's distribution
of the Class C Interest to the DCS Members, each of the DCS Members shall
contribute such member's pro rata share of the Class C Interest to Holdings,
free and clear of any Encumbrances.
ARTICLE V
MEMBERSHIP TRANSFERS
5.1 TRANSFERS OF MEMBERSHIP INTERESTS IN DCS. Immediately following the
Holdings Capitalization, each of the DCS Members shall contribute such Member's
entire membership interest in DCS to the Corporate B Member owned by such
Member, free and clear of any Encumbrances.
5.2 TRANSFERS OF MEMBERSHIP INTERESTS IN HOLDINGS. Immediately following
the Holdings Capitalization, each of the Holdings Members shall contribute such
member's entire membership interest in Holdings to the Corporate C Member owned
by such Member, free and clear of any Encumbrances.
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ARTICLE VI
MANAGEMENT AGREEMENT AND INCENTIVE PAYMENT
6.1 MANAGEMENT AGREEMENT. As part of the Class A Sale, Castle West and
Holdings shall enter into and deliver the Management Agreement pursuant to which
Holdings shall manage the business and operations of Castle West pursuant to the
terms described therein.
6.2 POST-CLOSING OPERATIONS. Following the Closing, pursuant to the
Management Agreement, Holdings shall be responsible for management of the
day-to-day operations of Castle West's operations within the California counties
of Los Angeles, Orange, Riverside, Ventura, Kern, San Bernardino, Santa ▇▇▇▇▇▇▇
and San Diego (collectively, the "Territory"). Acquisition and expansion
opportunities acquired by Castle, CDC or any of their Affiliates within the
Territory will be included within Castle West. Castle, in its sole discretion,
will determine whether expansion and acquisition opportunities that Castle
generates outside of the Territory should be included within Castle West. All
acquisition and expansion opportunities shall be subject to the prior approval
of Castle; provided that if any acquisition or expansion constitutes a CDC
Approved Expansion, the results of operations, costs of capital and Castle West
Debt arising from such CDC Approved Expansion shall be excluded from all
calculations of Adjusted EBITDA, Adjusted Aggregate EBITDA, Incremental EBITDA,
EBITDA, EBTDA, Incentive Payments, Holdings Old Value, Holdings New Value and
Castle West Debt hereunder. Castle shall fund such acquisitions and expansions,
including the Acquired Clinics. All material investment costs, incentives,
profit distributions and expenses related to Castle West acquisitions or
expansions will be subject to the approval of Castle's board of directors and,
following the execution of a definitive agreement with respect thereto, all such
amounts will be borne by Castle West. Castle West will be assessed a capital
cost with respect to all funds expended in accordance with the previous sentence
plus the value of Common Stock issued by Castle (determined in accordance with
acquisition agreements pursuant to which such Common Stock is issued) to close
acquisitions or expansions following the Closing Date included within Castle
West. The cost of such capital shall be deemed to be the actual rate charged
Castle by its lender from time to time plus .25% (the "Capital Cost Rate").
6.3 INCENTIVE PAYMENT. As compensation for providing services under the
Management Agreement, in the event that the actual EBITDA of Castle West and/or
DCS (as appropriate) for any calendar year, or portion thereof, ending prior to
the exercise of CDC's Call Option exceeds (a) for the year beginning January 1,
1998, Adjusted Aggregate EBITDA for DCS, (b) for the year beginning January 1,
1999, the aggregate of (i) DCS's and the Existing PCs' EBITDA for the period
from January 1, 1998 until the Closing Date, (ii) Castle West's EBITDA for the
period from the Closing Date until December 31, 1998, and (iii) Pro Forma MSO
Fees for each Acquired Clinic from January 1, 1998 until the date of
consummation of such Acquired Clinic, and (c) for each year beginning January 1,
2000 or later, Castle West's EBITDA for the immediately preceding calendar year,
Castle West shall pay Holdings the following percentages of excess EBTDA (the
"Incentive Payment"):
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INCREASE IN CASTLE WEST EBITDA PERCENTAGE OF EXCESS EBTDA
FROM PREVIOUS YEAR PAYABLE TO HOLDINGS
Less than 26% 0.0%
26% or more but less than 27% 2.0%
27% or more but less than 28% 4.0%
28% or more but less than 29% 6.0%
29% or more but less than 30% 7.5%
30% or more but less than 31% 9.0%
31% or more but less than 32% 10.5%
32% or more but less than 33% 12.0%
33% or more but less than 34% 13.0%
34% or more but less than 35% 14.0%
35% or more but less than 36% 15.0%
36% or more but less than 37% 16.0%
37% or more but less than 38% 17.0%
38% or more but less than 39% 18.0%
39% or more but less than 40% 19.0%
40 % or more 20.0%
"EBTDA" is defined as earnings adjusted, without duplication, to reverse charges
thereto made for federal and state income and franchise taxes, depreciation and
amortization. It is acknowledged that earnings will be reduced by a cost of
capital charge equal to the Capital Cost Rate multiplied by all Castle West
Debt. EBTDA shall be determined prior to any deduction of the Incentive Payment
from earnings and, other than as stated above, there shall be no deduction for
any overhead, management or similar fees paid by Castle West to any Affiliate of
Castle or otherwise allocated to Castle West. EBTDA will be determined each year
based upon audited financial statements of Castle West prepared in accordance
with GAAP consistently applied in the normal course of business. The Incentive
Payment will be paid in cash each year prior to the end of March in the year
immediately following the year during which the Incentive Payment is earned.
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ARTICLE VII
CORPORATE B MEMBERS' OPTION
7.1 CORPORATE B MEMBER'S OPTION TO CAUSE B MERGER. The Corporate B
Members (as a group) shall have the right and option ("Corporate B Members'
Merger Option") to cause all of the Corporate B Members to merge with and into
CDC (the "B Merger") at any time following the twelve-month anniversary of the
Closing and prior to the 24-month anniversary of the Closing, in the manner and
subject to the conditions set forth herein.
(a) B MERGER NOTICE. In order to exercise their right and option
to cause the B Merger to occur, Corporate B Members owning a majority in
interest of the membership interest in DCS shall notify ("B Merger
Notice") CDC of their intent to cause the B Merger.
(b) CDC'S AND CORPORATE B MEMBERS' OBLIGATIONS. Promptly
following the receipt of a B Merger Notice, each DCS Member shall cause
such Member's Corporate B Member to enter into and perform the B Merger
Agreement and Castle shall cause CDC to enter into and perform the B
Merger Agreement. Pursuant to the B Merger Agreement, each Corporate B
Member will be merged with and into CDC and CDC shall be the surviving
corporation. The B Merger Agreement shall provide for the conversion of
all of the outstanding capital stock of the Corporate B Members into
that number of shares of Common Stock (valued at the Common Stock Value)
with an aggregate value equal to the amount determined by multiplying
the Adjusted Aggregate EBITDA by 20%, then multiplying the resulting
number by 6.5 (the initial purchase multiple) and subtracting from the
balance 20% of the purchase price of the Acquired Clinics (the "B Merger
Consideration"). The B Merger Consideration for each Corporate B Member
shall be equal to the Corporate B Member's Pro Rata Share of the B
Merger Consideration. By their execution of this Agreement, each DCS
Member, as the sole stockholder of such DCS Member's Corporate B Member,
and Castle, as the sole stockholder of CDC, agrees to vote for, adopt,
consent to and agree to the B Merger pursuant to the terms of the B
Merger Agreement if the Corporate B Members' Merger Option is exercised.
Prior to the closing of the B Merger, Castle shall cause a Notice of
Inclusion to be filed with the Nasdaq National Market regarding all
shares of Common Stock issuable pursuant to this Agreement. The B Merger
Consideration will be distributed to the stockholders of a Corporate B
Member promptly following the closing of the B Merger (which will be
consummated as soon as reasonably practicable after the exercise of the
Corporate B Member's Merger Option) and the receipt by CDC of a properly
executed Letter of Transmittal from such stockholder, complete with
stock powers executed in blank and the stock certificates representing
all of the outstanding capital stock of such Corporate B Member.
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(c) LEGEND. Each DCS Member agrees to maintain a legend on all
certificates representing such member's capital stock in his or her
Corporate B Member referring to the right and option set forth in this
Section. Each DCS Member acknowledges that any Common Stock issued to it
hereunder shall contain a legend referring to restrictions on transfer
arising under the Securities Act and state Blue Sky laws.
(d) STOCK SPLITS, ETC. If, prior to the B Merger, Castle shall
effect a subdivision or consolidation of shares or other increase or
reduction in the number of shares of the Common Stock outstanding
without receiving compensation therefor in money, services or property
(including a stock dividend), then (i) in the event of an increase in
the number of such shares outstanding, the Common Stock Value shall be
proportionately decreased and (ii) in the event of a decrease in the
number of such shares outstanding the Common Stock Value shall be
proportionately increased.
(e) RECAPITALIZATION TRANSACTIONS. If, prior to the B Merger,
Castle (i) consolidates with or merges into any other Person where
Castle is not the continuing or surviving corporation of such
consolidation or merger, (ii) permits any other Person to consolidate
with or merge into Castle even though Castle shall be the continuing or
surviving Person where, in connection with such consolidation or merger,
the Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (iii)
transfers all or substantially all of its properties or assets to any
other Person (each, a "Recapitalization Transaction"), following each
such transaction, each Corporate B Member shall be entitled upon
consummation of the B Merger to receive, (subject to any required action
by stockholders to consummate the Recapitalization Transaction) in lieu
of the number of shares of Common Stock to which such Member would
otherwise be entitled, the number and class of shares of stock, other
securities or consideration to which such Member would have been
entitled to receive pursuant to the terms of the Recapitalization
Transaction if, immediately prior to such Recapitalization Transaction,
such Member had been the holder of record of a number of shares of
Common Stock equal to the number of shares of Common Stock to which such
Member would have received upon consummation of the B Merger.
(f) BINDING AGREEMENT. Prior to the consummation of the B Merger,
Castle shall not enter into a Recapitalization Transaction unless, prior
to the consummation thereof, each Person (other than Castle) which may
be required to deliver any stock, securities, cash or property in
exchange for the outstanding shares of Common Stock of Castle shall
assume, by written instrument (i) the obligations of Castle under this
Agreement (and if Castle shall survive the consummation of such
transaction, such assumption shall be in addition to, and shall not
release Castle from, any continuing obligations of Castle under this
Agreement) and (ii) the obligation to deliver to such Corporate B
Members such shares of stock, securities, cash or
22
property as, in accordance with Section 7.1(e), such holder may be
entitled to receive upon consummation of the B Merger.
(g) ACCELERATION OF RIGHT TO EXERCISE. Notwithstanding the
foregoing, in the event Castle West terminates the Management Agreement
(other than because of a breach thereof by Holdings which gives Castle
West the right to terminate the Management Agreement) or breaches the
Management Agreement in such a manner as to give Holdings the right to
terminate the Management Agreement, the Corporate B Members, as a group,
shall immediately have the right to deliver the B Merger Notice and
convert the shares of common stock in the Corporate B Members into
Common Stock pursuant to the B Merger.
7.2 CDC'S OPTION TO CAUSE B MERGER. In the event Holdings terminates the
Management Agreement (other than because of a breach thereof by Castle West
which gives Holdings the right to terminate the Management Agreement) or
breaches the Management Agreement in such a manner as to give Castle West the
right to terminate the Management Agreement, CDC shall immediately have the
right, but not the obligation, to cause all of the Corporate B Members to merge
with and into CDC (the "B Merger") in the manner and subject to the conditions
set forth in Section 7.1 above as if such termination or breach of the
Management Agreement constituted the delivery of the B Merger Notice.
ARTICLE VIII
CORPORATE C MEMBERS' AND CDC'S OPTIONS
8.1 CORPORATE C MEMBER'S OPTION TO CAUSE C MERGER. Each Corporate C
Member (other than the holder of the Class III Interest (whose right shall be
limited to the circumstances described in Section 8.1(b) and 8.1(j) below))
shall have the right and option ("Corporate C Member's Merger Option") to cause
such Corporate C Member to merge with and into CDC (each, a "C Merger"), in the
manner and subject to the conditions set forth herein.
(a) C MERGER NOTICE. In order to exercise its right and option to
cause the C Merger with respect to itself to occur, a Corporate C Member
shall notify ("C Merger Notice") CDC of its intent to cause a C Merger.
The C Merger Notice shall state what percentage of the merger
consideration to be received by the Holdings Member owning the
applicable Corporate C Member ("C Merger Consideration") it elects to
receive in cash; provided, however, that at least 50% of the C Merger
Consideration shall be payable by CDC in Common Stock and, if the
Corporate C Member elects to receive more than 25% of the C Merger
Consideration in cash, CDC shall have the option of delivering a
promissory note of Castle for the amount by which such cash payment
would otherwise exceed 25% of the C Merger Consideration. Such note
would be subordinated to the Company's institutional senior lenders
substantially in accordance with the terms of the Subordination
Agreement,
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would bear interest, payable quarterly in arrears, at the Capital Cost
Rate and the principal thereon would be payable in one installment being
payable on the first anniversary of the effective date of the applicable
C Merger. Other than as set forth in the previous sentence, such note
would be substantially in the form of the Notes.
(b) CDC'S AND CORPORATE C MEMBER'S OBLIGATIONS. Promptly
following the receipt of a C Merger Notice, but no later than five days
thereafter, CDC shall send or cause to be sent to each Corporate C
Member a copy of the C Merger Notice so received. Each other Corporate C
Member shall have the right (exercisable by delivery to CDC of a C
Merger Notice with respect to itself within 10 days of the delivery of
the notice from CDC with respect to the receipt of the C Merger Notice
from the other Corporate C Member) to be a party to such C Merger.
Promptly following the receipt of a C Merger Notice, but no later than
15 days thereafter, CDC shall cause the C Merger Consideration to be
computed. CDC shall then promptly send a notice to the Corporate C
Member or Members informing such Member(s) of the calculation of the C
Merger Consideration. Each stockholder of an applicable Corporate C
Member shall cause such Corporate C Member promptly to enter into and
perform the C Merger Agreement and Castle shall cause CDC promptly to
enter into and perform the C Merger Agreement. Pursuant to the C Merger
Agreement, such Corporate C Member will be merged with and into CDC and
CDC shall be the surviving corporation. The C Merger Agreement shall
provide for the conversion of all of the outstanding capital stock of
such Corporate C Member into the C Merger Consideration. By their
execution of this Agreement, each stockholder of each such Corporate C
Member, and Castle, as the sole stockholder of CDC, agrees that it will
vote for, adopt, consent to and agree to the C Merger pursuant to the
terms of the C Merger Agreement if such Corporate C Member's Merger
Option is exercised. Each C Merger shall be consummated as soon as
reasonably practicable following the exercise of the applicable
Corporate C Member's Merger Option. The C Merger Consideration will be
distributed to the stockholders of a Corporate C Member promptly
following the closing of the C Merger and the receipt by CDC of a
properly executed Letter of Transmittal from such stockholder, complete
with the stock certificates representing all of the outstanding capital
stock of such Corporate B Member.
(c) C MERGER CONSIDERATION. The C Merger Consideration shall be
equal to the Corporate C Member's Pro Rata Share of the Holdings Old
Value plus the Corporate C Member's Pro Rata Share of the Holdings New
Value less the Corporate C Member's Pro Rata Share of the Holdings
Indebtedness. The Holdings Old Value shall be equal to 20% of the
Adjusted Aggregate EBITDA multiplied by the initial purchase multiple of
6.5 less (i) 20% times the purchase price of the Acquired Clinics and
(ii) 25% of the Burbank Adjustment. The gross Holdings New Value shall
be equal to 20% of the Incremental EBITDA multiplied by 90% of the
trailing twelve-month EBITDA market multiple for Castle Common Stock.
The
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trailing twelve-month EBITDA market multiple for Castle Common Stock
shall be determined by multiplying the average closing price of the
Common Stock on the principal exchange or quotation system therefor over
the 30-day period ending on the date immediately prior to delivery of
the C Merger Notice by the weighted average fully diluted number of
shares of Common Stock outstanding over the one-year period ending on
such date and dividing the product by Castle's aggregate EBITDA for the
four quarters preceding such date. Incremental EBITDA will be equal to
the amount by which the EBITDA for Castle West for the prior four fiscal
quarters ending immediately prior to delivery of the C Merger Notice
exceeds the Adjusted Aggregate EBITDA. EBITDA will be equal to Castle
West's earnings determined in accordance with GAAP adjusted to reverse
charges thereto made for interest, federal and state income and
franchise taxes, depreciation and amortization, to the extent included
in the calculation of earnings. EBITDA shall be determined prior to any
deduction of the Incentive Payment from earnings and there shall be no
deduction for any overhead, management or similar fees paid by Castle
West to any Affiliate of Castle or otherwise allocated to Castle West.
The gross Holdings New Value shall be reduced (as so reduced, the
"Holdings New Value"), without duplication, by (i) the aggregate capital
costs related to Common Stock invested in Castle West acquisitions or
expansions, excluding DCS, the Existing PCs and the Acquired Clinics,
and (ii) a percentage of 20% of the Castle and Castle West debt (as of
the date immediately prior to the delivery of the C Merger Notice)
directly related to Castle West's business and operations (excluding
debt related to the acquisition of DCS, the Existing PCs, the Acquired
Clinics and any CDC Approved Expansion)("Castle West Debt") determined
as follows:
CASTLE WEST PERCENTAGE OF 20% OF
ANNUAL GROWTH RATE CASTLE WEST DEBT
FROM JANUARY 1, 1999 ALLOCATED TO HOLDINGS INTEREST
Less than 26% 100.0%
26% or more but less than 27% 90.0%
27% or more but less than 28% 80.0%
28% or more but less than 29% 70.0%
29% or more but less than 30% 60.0%
30% or more but less than 31% 50.0%
31% or more but less than 32% 40.0%
32% or more but less than 33% 30.0%
33% or more but less than 34% 20.0%
-25-
34% or more but less than 35% 10.0%
35% or more 0.0%
Aggregate capital costs related to Common Stock invested in Castle West
acquisitions or expansions shall be based upon the valuation given to
such Common Stock pursuant to the agreements pursuant to which such
acquisitions or expansions were consummated multiplied by the Capital
Cost Rate. Incremental EBITDA and the outstanding Castle West Debt used
to determine the Holdings New Value shall exclude the EBITDA, Castle
West Debt and Common Stock capital costs relating to any acquisitions
completed in the three-month period immediately preceding the delivery
of the C Merger Notice. The C Merger Consideration shall be paid (i) by
delivery of Common Stock valued (the "Share Value") at the average
closing price of the Common Stock on the primary exchange or quotation
system on the 30 trading days immediately prior to delivery of the C
Merger Notice, (ii) in cash at the closing by wire transfer of
immediately available funds payable to the account of the stockholder of
the appropriate Corporate C Member and (iii) if the Corporate C Member
elects to receive more than 25% of the C Merger Consideration in cash,
at the election of CDC, by delivery of notes in the form described in
Section 8.1(a). Notwithstanding the foregoing, in no event shall the
aggregate number of shares of Common Stock issuable as C Merger
Consideration (when added to the number of shares of Common Stock issued
as B Merger Consideration) exceed 20% of the number of shares of Common
Stock outstanding on the Closing Date ("Share Limitation"). If the
number of shares of Common Stock issuable as C Merger Consideration
would, if issued, exceed the Share Limitation, the number of shares of
Common Stock issuable as C Merger Consideration shall be limited to the
Share Limitation and cash equal in value to (i) such number of shares in
excess of the Share Limitation multiplied by (ii) the Share Value shall
be substituted for the remainder thereof. The shares of Common Stock
delivered by CDC shall be unregistered and subject to the restrictions
on transfer required by the Securities Act and state Blue Sky laws. In
addition to the C Merger Consideration set forth above, following the
closing of a C Merger, CDC shall be required to pay in cash to the
stockholders of the Corporate C Member so merged, such Corporate C
Member's Pro Rata Share of the Incentive Payment relating to any portion
of a year with respect to which Castle West had not yet paid the
Incentive Payment at the time of delivery of the C Merger Notice. Such
payment shall be calculated based upon the entire year's operations
(unless otherwise provided below) and shall be payable at the same time
that Castle West is obligated to pay Holdings the Incentive Payment
relating to such year. If, following the consummation of a C Merger,
however, CDC is the only member in Holdings, such payment shall be
calculated based upon the actual results for the portion of a year
ending at the end of the calendar month immediately prior to the date of
delivery of the C Merger
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Notice (as compared to the same prior year period) and shall be paid
within 90 days of the consummation of such C Merger.
(d) RECAPITALIZATION TRANSACTIONS. If, prior to a C Merger,
Castle enters into a Recapitalization Transaction, following each such
transaction, each Corporate C Member shall be entitled upon consummation
of a C Merger to receive, (subject to any required action by
stockholders to consummate the Recapitalization Transaction) in lieu of
the number of shares of Common Stock to which such Member would
otherwise be entitled, the number and class of shares of stock, other
securities or consideration to which such Member would have been
entitled to receive pursuant to the terms of the Recapitalization
Transaction if, immediately prior to such Recapitalization Transaction,
such Member had been the holder of record of a number of shares of
Common Stock equal to the number of shares of Common Stock to which such
Member would have received upon consummation of a C Merger.
(e) BINDING AGREEMENT. Prior to the consummation of the C Merger,
Castle shall not enter into a Recapitalization Transaction unless, prior
to the consummation thereof, each Person (other than Castle) which may
be required to deliver any stock, securities, cash or property in
exchange for the outstanding shares of Common Stock of Castle shall
assume, by written instrument (i) the obligations of Castle under this
Agreement (and if Castle shall survive the consummation of such
transaction, such assumption shall be in addition to, and shall not
release Castle from, any continuing obligations of Castle under this
Agreement) and (ii) the obligation to deliver to such Corporate C
Members such shares of stock, securities, cash or property as, in
accordance with Section 8.1(d), such holder may be entitled to receive
upon consummation of a C Merger.
(f) LIMITATION ON TIMING OF C MERGERS. Each Corporate C Member
shall be entitled to deliver a C Merger Notice with respect to itself
either independently or in conjunction with one or more of the other
Corporate C Members at any time following the 24-month anniversary of
the Closing. However, CDC shall not be obligated to enter into a C
Merger Agreement with any Corporate C Member if, during the previous
12-month period, CDC shall have consummated on two separate occasions a
C Merger with any other Corporate C Member.
(g) LEGEND. Each Corporate C Member acknowledges that any Common
Stock issued to it hereunder shall contain a legend referring to
restrictions on transfer arising under the Securities Act and state Blue
Sky laws.
(h) RESOLUTION OF DISPUTES. If any Corporate C Member disagrees
with the computation of the C Merger Consideration, the parties shall
resolve such dispute in the manner provided below. The Corporate C
Member's independent public accountants shall perform such procedures as
shall be agreed upon between such
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Corporate C Member and such independent public accountants regarding the
calculation (including any corresponding financial statements and work
papers of CDC's independent public accountants) and prepare and deliver
a written report with respect to any disagreement such independent
public accountants may have with regard to the calculation within 15
days of receipt thereof. If the Corporate C Member's independent public
accountants and CDC's independent public accountants cannot resolve such
disagreement within 15 days after CDC's independent public accountants
receipt of such report, then they shall so notify the Corporate C Member
and CDC, and the Corporate C Member and CDC shall attempt to resolve the
discrepancy within 15 days of such notice. If the Corporate C Member and
CDC cannot resolve the disagreement to their mutual satisfaction,
another independent public accounting firm reasonably acceptable to the
Corporate C Member and CDC shall be retained to resolve the disagreement
regarding the calculation. Such firm's conclusions as to the resolutions
of disputed matters for purposes of determining the C Merger
Consideration shall be conclusive. The Corporate C Member and CDC shall
share equally in the expenses of retaining such third independent
accounting firm. CDC shall pay the expenses of CDC's independent public
accountants for their work regarding the calculation and related
matters, and the Corporate C Member shall pay the expenses of the
Corporate C Member's independent public accountants for their work
regarding the calculation and related matters. The calculation of the C
Merger Consideration shall be determined in accordance with GAAP
consistently applied.
(i) ACCELERATION OF RIGHT TO EXERCISE. Notwithstanding the
foregoing, in the event Castle West terminates the Management Agreement
(other than because of a breach thereof by Holdings which gives Castle
West the right to terminate the Management Agreement) or breaches the
Management in such a manner as to give Holdings the right to terminate
the Management Agreement, each Corporate C Member shall immediately have
the right to deliver a C Merger Notice and to convert its shares of
common stock of its respective Corporate C Member into C Merger
Consideration.
(j) CLASS III INTEREST. If following the consummation of a C
Merger required by the delivery of a Corporate C Member's Merger Option,
the only remaining Corporate C Member would be the holder of the Class
III Interest, the Corporate C Member holding the Class III Interest
shall be deemed to have exercised its right to be a party to such C
Merger pursuant to Section 8.1(b) at the same time as the other
Corporate C Member(s) who delivered the applicable C Merger Notice and
such Corporate C Member shall be a party to such C Merger in accordance
with the terms of this Section 8.1 as if it had delivered such C Merger
Notice.
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8.2. CDC'S CALL OPTION. From and after the 30-month anniversary of the
Closing Date, CDC shall have the right and option ("CDC's Call Option") to cause
all, but not less than all, of the Corporate C Members to merge with and into
CDC, in the manner and subject to the conditions set forth herein.
(a) CALL NOTICE. In order to exercise CDC's Call Option, CDC
shall notify ("Call Notice") each Corporate C Member of its intent to
cause a C Merger. The Call Notice shall state the amount of the C Merger
Consideration. If any Corporate C Member disagrees with the computation
of the C Merger Consideration, the parties shall resolve such dispute in
the manner provided in Section 8.1(h).
(b) CDC'S AND CORPORATE C MEMBER'S OBLIGATIONS. Promptly
following the receipt of a Call Notice, the Holdings Members owning each
Corporate C Member shall cause such Corporate C Member to enter into and
perform a C Merger Agreement and Castle shall cause CDC to enter into
and perform such C Merger Agreements. Pursuant to the C Merger
Agreements, each Corporate C Member will be merged with and into CDC and
CDC shall be the surviving corporation. The C Merger Agreements shall
provide for the conversion of all of the outstanding capital stock of
each Corporate C Member into the C Merger Consideration; provided,
however, that in the circumstances described in paragraph 8.2(f) below,
any shares of Common Stock delivered by CDC pursuant to the exercise of
CDC's Call Option shall be fully registered freely transferrable shares.
By their execution of this Agreement, each Holdings Member, as the sole
stockholder of such Holdings Member's Corporate C Member, and Castle, as
the sole stockholder of CDC, agrees that it shall vote for, adopt,
consent to and agree to the C Merger pursuant to the terms of the C
Merger Agreement if CDC's Call Option is exercised.
(c) C MERGER CONSIDERATION. The C Merger Consideration for each C
Merger shall be equal to the Corporate C Member's Pro Rata Share of the
Holdings Old Value plus the Corporate C Member's Pro Rata Share of the
Holdings New Value less the Corporate C Member's Pro Rata Share of the
Holdings Indebtedness, in each case calculated in the manner provided in
Section 8.1(c), substituting the term "Call Notice" for the term "C
Merger Notice" therein, as appropriate. Subject to the limitations
contained in Section 8.1(a), at least 10 days prior to closing, each
Corporate C Member shall notify CDC of the portion of the C Merger
Consideration it elects to receive in cash. In addition to the C Merger
Consideration set forth above, following the closing of a C Merger, CDC
shall be required to pay in cash to the stockholders of the Corporate C
Member so merged, such Corporate C Member's Pro Rata Share of the
Incentive Payment relating to any portion of a year with respect to
which Castle West had not yet paid the Incentive Payment at the time of
delivery of the Call Notice. Such payment shall be calculated based upon
the actual results for the portion of a year ending at the end of the
calendar month including the date of delivery of the Call Notice (as
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compared to the same prior year period) and shall be payable within 90
days of the consummation of the C Merger.
(d) RECAPITALIZATION TRANSACTIONS. If, prior to the C Merger,
Castle enters into a Recapitalization Transaction, following each such
transaction, each Corporate C Member shall be entitled upon consummation
of the C Merger to receive, (subject to any required action by
stockholders to consummate the Recapitalization Transaction) in lieu of
the number of shares of Common Stock to which such Member would
otherwise be entitled, the number and class of shares of stock, other
securities or consideration to which such Member would have been
entitled to receive pursuant to the terms of the Recapitalization
Transaction if, immediately prior to such Recapitalization Transaction,
such Member had been the holder of record of a number of shares of
Common Stock equal to the number of shares of Common Stock to which such
Member would have received upon consummation of the C Merger.
(e) BINDING AGREEMENT. Prior to the consummation of the C Merger,
Castle shall not enter into a Recapitalization Transaction unless, prior
to the consummation thereof, each Person (other than Castle) which may
be required to deliver any stock, securities, cash or property in
exchange for the outstanding shares of Common Stock of Castle shall
assume, by written instrument (i) the obligations of Castle under this
Agreement (and if Castle shall survive the consummation of such
transaction, such assumption shall be in addition to, and shall not
release Castle from, any continuing obligations of Castle under this
Agreement) and (ii) the obligation to deliver to such Corporate C
Members such shares of stock, securities, cash or property as, in
accordance with Section 8.2(d), such holder may be entitled to receive
upon consummation of the C Merger.
(f) DELIVERY OF FULLY REGISTERED FREELY TRANSFERRABLE SHARES.
Following the Closing, Castle's securities counsel, in conjunction with
DCS's securities counsel, shall contact the Commission to determine (i)
whether the shares of Castle Common Stock issuable as C Merger
Consideration upon the consummation of the C Mergers to be implemented
as a result of the exercise of CDC's Call Option may be registered on
Form S-3 (as to the issuance of such shares and not for resale following
their issuance) and (ii) the required timing for filing such a
registration statement on Form S-3. In the event the Commission agrees
that the issuance of such shares is registrable on Form S-3 and such
registration statement may be filed after CDC delivers the Call Notice,
at Holdings' election, Castle shall be required to deliver fully
registered freely transferrable shares of Common Stock upon consummation
of the C Mergers required by the exercise of CDC's Call Option provided
Castle is then eligible to utilize Form S-3. Castle agrees to use its
reasonable efforts to become and remain eligible to utilize Form S-3. In
such event, following the delivery of the Call Notice, Castle shall
expeditiously prepare and file a registration statement with the
Commission registering the shares of Common Stock (and notes, if
applicable) issuable as part of
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the C Merger Consideration, but in any event, within 10 business days of
the delivery of the Call Notice. The closing of the C Merger shall be
delayed until such time as such registration statement is declared
effective by the Commission. Castle shall use its best efforts to
expedite the registration of such shares of Common Stock in order that
the delay between the delivery of the Call Notice and the closing of the
C Merger shall be as brief as practicable.
(g) LEGEND. Each Holdings Member agrees to maintain a legend on
all certificates representing the capital stock of its Corporate C
Member referring to the right and option set forth in this Section. Each
Corporate C Member acknowledges that any Common Stock issued to it
hereunder (other than fully registered freely transferrable shares)
shall contain a legend referring to restrictions on transfer arising
under the Securities Act and state Blue Sky laws.
(h) ACCELERATION OF RIGHT TO EXERCISE. Notwithstanding the
foregoing, in the event Holdings terminates the Management Agreement
(other than because of a breach thereof by Castle West which gives
Holdings the right to terminate the Management Agreement) or breaches
the Management Agreement in such a manner as to give Castle West the
right to terminate the Management Agreement, CDC shall immediately have
the right to deliver the Call Notice and cause the consummation of the C
Merger.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES OF DCS
As an inducement to Castle and CDC to enter into and perform this
Agreement, DCS hereby represents and warrants to Castle West, Castle and CDC as
follows:
9.1 EXISTENCE AND GOOD STANDING. DCS and each Existing PC is duly
organized and validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization with full power and authority
to own its properties and conduct its business as now conducted and is duly
qualified or authorized to do business and is in good standing in all
jurisdictions wherein the nature of its business or the character of property
owned or leased may require it to be authorized or qualified to do business
except where the absence of which would have a Material Adverse Effect. DCS and
each Existing PC holds all licenses, consents and approvals, and has satisfied
all eligibility and other similar requirements imposed by federal and state
regulatory bodies, administrative agencies or other governmental bodies,
agencies or officials, in each case as required for the conduct of the business
in which it is engaged.
9.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. DCS has full legal right,
power and authority to enter into this Agreement and this Agreement has been
duly authorized, executed and delivered by DCS and constitutes a valid and
binding agreement of DCS enforceable against DCS in
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accordance with its 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.
9.3 OWNERSHIP. The owners of membership interests in DCS are set forth
on SCHEDULE 9.3. All of the membership interests of DCS have been duly and
validly authorized and issued, and are fully paid and nonassessable. Other than
as set forth herein or contemplated hereby, DCS does not have outstanding any
options to purchase, or any rights or warrants to subscribe for, or any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, any membership interests therein.
9.4 CONSENTS AND APPROVALS: NO VIOLATIONS. Except as set forth on
SCHEDULE 9.4, no consent, approval, authorization or order of any court or
governmental agency or body or third party is required for the performance of
this Agreement by DCS or any Existing PC or the consummation by DCS or any
Existing PC of the transactions contemplated hereby, except such as have been
obtained or may be required under the Securities Act or state Blue sky laws.
Except as set forth on SCHEDULE 9.4, DCS's performance of this Agreement and the
consummation of the transactions contemplated hereby will not result in a breach
or violation of, or conflict with, any of the terms or provisions of, or
constitute a default by DCS or any Existing PC or under, any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or instrument
to which DCS or any Existing PC is a party or to which DCS or any Existing PC or
any of their respective properties is subject, the certificate of incorporation,
bylaws or other governing instrument of DCS or any Existing PC or any judgment,
decree, order, rule or, to the knowledge of DCS, any statute or regulation of
any court or governmental agency or body applicable to DCS, any Existing PC or
any of their respective properties. Neither DCS nor any Existing PC is in
violation of its certificate of incorporation, bylaws or other governing
instrument or any law, administrative rule or regulation or arbitrators' or
administrative or court decree, judgment or order or in violation or default
(there being no existing state of facts which with notice or lapse of time or
both would constitute a default) in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, deed of trust, mortgage, loan agreement, note, lease, agreement or
other instrument or Permit to which it is a party or by which it or any of its
properties is or may be bound, which violation or default could reasonably be
expected to have a Material Adverse Effect.
9.5 SUBSIDIARIES AND AFFILIATES. Except as set forth on SCHEDULE 9.5,
neither DCS nor any Existing PC has any subsidiaries nor has it conducted
business under any name except its legal name on its organizational documents.
Except as set forth on SCHEDULE 9.5, neither DCS nor any Existing PC owns, of
record or beneficially, or controls, directly or indirectly, any capital stock,
securities convertible into capital stock or any other equity interest in any
corporation, association or other business entity, and neither DCS nor any
Existing PC is, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity.
9.6 FINANCIAL STATEMENTS: NO MATERIAL ADVERSE CHANGE. DCS has heretofore
furnished CDC with its and the Existing PCs compilated balance sheets as of
September 30, 1997 (the "Balance
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Sheet Date"), the compilated statements of operations and cash flows for the
period then ended, the compilated balance sheets of DCS and the Existing PCs as
of December 31, 1996 and 1995, and the compilated statements of operation and
cash flows for the years then ended (all such compilated financial statements,
collectively, the "Financial Statements"). The Financial Statements fairly
present in all material respects in accordance with DCS's past accounting
practices the financial position of DCS and the Existing PCs at the dates
thereof and the results of operations of DCS and the Existing PCs and their cash
flows for the periods indicated. Except as set forth in SCHEDULE 9.6 attached
hereto, since the Balance Sheet Date there has been no material adverse change
in the assets or liabilities, or in the business or condition, financial or
otherwise, or in the results of operations of DCS or any Existing PC.
Other than as (i) disclosed in the Financial Statements, (ii) incurred
since the Balance Sheet Date in the ordinary course of business or (iii)
disclosed on SCHEDULE 9.6 or another Schedule hereto, neither DCS nor any
Existing PC has any direct or indirect indebtedness, liability, claim,
deficiency, obligation or responsibility, known or unknown, fixed or contingent,
liquidated or unliquidated, accrued, absolute or otherwise.
9.7 BOOKS AND RECORDS. DCS has previously made available to CDC true,
correct and complete copies of its certificate of formation and limited
liability company agreement and all amendments to each as well as the articles
of incorporation and bylaws of each of the Existing PCs. The minute books of DCS
and the Existing PCs, as previously made available to CDC and its
representatives, contain accurate records in all material respects of the
meetings of the DCS Members and the stockholders of the Existing PCs.
9.8 TITLE TO PROPERTIES: ENCUMBRANCES: CONDITION. Except as set forth in
SCHEDULE 9.8 or 9.9, and except for properties and assets reflected in the
Financial Statements or acquired since the Balance Sheet Date which have been
sold or otherwise disposed of in the ordinary course of business, DCS and each
Existing PC has good and valid title to its assets, in each case subject to no
Encumbrances except for (i) Encumbrances consisting of easements, permits and
other restrictions or limitations on the use of real property or irregularities
in title thereto that do not materially detract from the value of, or materially
impair the use of, such property by DCS or such Existing PC in the operation of
the Business, (ii) Encumbrances for current taxes, assessments or governmental
charges or levies on property not yet due or delinquent or currently contested
in good faith and as to which reserves have been recorded in accordance with
GAAP, (iii) materialmen's and similar statutory liens in favor of service
providers, and (iv) Encumbrances created by CDC or pursuant to or contemplated
by this Agreement or any other agreement contemplated hereby (liens of the type
described in clauses (i), (ii), (iii) and (iv) above are hereinafter sometimes
referred to as "Permitted Encumbrances"). DCS has heretofore furnished CDC with
a fixed asset ledger which sets forth all material fixed assets owned by DCS and
each Existing PC as of the Balance Sheet Date. DCS is not aware of any defects
in such assets that would have a Material Adverse Effect.
9.9 REAL PROPERTY. SCHEDULE 9.9 identifies all interests in real
property used by DCS and the Existing PCs in the Business, including leases, and
includes the name of either the lessor or the
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record title holder thereof. All of the buildings, structures and appurtenances
situated on the real property owned or leased by DCS and the Existing PCs are in
good operating condition, and in a state of good maintenance and repair, subject
to ordinary wear and tear. The real property has adequate rights of ingress and
egress for operation of the Business in the ordinary course as currently
conducted. No condemnation or similar proceeding is pending or, to the best
knowledge of DCS, threatened, which would preclude or impair the use of any such
property, except where such proceeding would not have a Material Adverse Effect.
9.10 LEASES. SCHEDULE 9.10 contains an accurate and complete list of all
personal property leases to which DCS or any Existing PC is a party (as lessee
or lessor). To the knowledge of DCS, each lease set forth in SCHEDULE 9.10 is in
full force and effect, and no event has occurred that with the giving of notice,
the passage of time or both would constitute a default thereunder.
9.11 MATERIAL CONTRACTS. SCHEDULE 9.11 contains an accurate and complete
list of all material contracts, commitments and similar agreements to which DCS
or any Existing PC is a party or by which it or any of its properties are bound
(including but not limited to, contracts with significant customers, joint
venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land). The contracts set forth on
SCHEDULE 9.11 include (a) any written agreement, contract or commitment relating
to the employment of any person by DCS or any Existing PC, (b) any agreement,
indenture or other instrument which contains restrictions with respect to
payment of profits, dividends or any other distributions, (c) any agreement,
contract or commitment relating to capital expenditures in excess of $20,000,
(d) any loan or advance to, or investment in, any Person or any agreement,
contract or commitment relating to the making of any such loan, advance or
investment, (e) any guarantee or other contingent liability in respect of any
indebtedness or obligation of any Person, (f) any management service, consulting
or any other similar type contract, (g) any agreement, contract or commitment
limiting the freedom of DCS or any Existing PC to engage in any line of business
or to compete with any Person, (h) any agreement, contract or commitment which
involves $20,000 or more and is not cancellable without penalty within 90 days,
or (i) any other agreement, contract or commitment, the breach or nonperformance
of which would reasonably be expected to cause a Material Adverse Effect. Also
set forth in SCHEDULE 9.11 is a list of all proposals submitted by DCS or any
Existing PC to any third party that, if accepted by such third party, would
require disclosure on SCHEDULE 9.11. Each contract or agreement set forth in
SCHEDULE 9.11 is in full force and effect and to the knowledge of DCS there
exists no default or event of default or event, occurrence, condition or act
(including the purchase of the Assets hereunder) which, with the giving of
notice, the lapse of time or the happening of any other event or condition,
would become a default or event of default thereunder.
9.12 PERMITS. SCHEDULE 9.12 attached hereto lists all of the
governmental and other third party permits (including occupancy permits),
licenses, consents and authorizations ("Permits") required in connection with
the use, operation or ownership of the Assets and the conduct of the Business as
currently conducted. DCS or an Existing PC holds all of the applicable Permits
listed on SCHEDULE 9.12, and, to the knowledge of DCS, none is presently subject
to revocation or challenge. Except as set forth on SCHEDULE 9.12, none of such
Permits will be subject to revocation or
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termination as a result of the consummation of the transactions contemplated
hereby. To the knowledge of DCS, each of the (i) dentists, orthodontists, other
dental specialists and (ii) other professionals involved in providing dental
care to patients (each, a "Professional") who is employed by or affiliated with
DCS or an Existing PC has such Permits under 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, orthodontic and other
specialty dental care in such jurisdictions, the failure of which to have would
have a Material Adverse Effect; each of such 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 SCHEDULE 9.12, no such Permit contains any restrictions
that are materially burdensome to the holder thereof.
9.13 LITIGATION. Except as set forth in SCHEDULE 9.13, there is no
action, suit, proceeding at law or in equity, arbitration or administrative or
other proceeding by or before (or, to the knowledge of DCS, any investigation
by) any governmental or other instrumentality or agency, pending, or, to the
knowledge of DCS, threatened, against or affecting the properties, rights or
goodwill of DCS or any Existing PC, or employees of DCS or any Existing PC, and
DCS knows of no valid basis for any such action, proceeding or investigation.
There are no such suits, actions, claims, proceedings or investigations pending
or, to the knowledge of DCS threatened, seeking to prevent or challenge the
transactions contemplated by this Agreement.
9.14 TAXES. (a) All returns and reports for Taxes for all taxable years
or periods that end on or before the Closing Date and, with respect to any
taxable year or period beginning before and ending after the Closing Date, the
portion of such taxable year or period ending on and including the Closing Date
("Pre-Closing Periods"), which are required to be filed by or with respect to
DCS and each Existing PC (collectively, the "Returns"), have been or will be
filed when due in a timely fashion and such Returns as filed are or will be
accurate in all material respects.
(b) Except as provided in SCHEDULE 9.14, there is no material
action, suit, proceeding, investigation (to the knowledge of DCS), audit, or
claim now pending or, to the knowledge of DCS, threatened by any authority
regarding any Taxes relating to DCS or any Existing PC for any Pre-Closing
Period.
(c) Except as provided in SCHEDULE 9.14, there are no liens or
security interests on any of the assets of DCS or any Existing PC that arose in
connection with any failure (or alleged failure) to pay any Taxes.
(d) Except as provided in SCHEDULE 9.14, there are no agreements
for the extension or waiver of the time for assessment of any Taxes relating to
DCS or any Existing PC for any Pre-Closing Period and neither DCS nor any
Existing PC has been requested to enter into any such agreement or waiver.
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(e) All Taxes relating to DCS and each Existing PC which DCS or
such Existing PC is required by law to withhold or collect have been duly
withheld or collected, and have been timely paid over to the proper authorities
to the extent due and payable, except with respect to such amounts being
contested in good faith and as to which reserves have been recorded in the
Financial Statements in accordance with GAAP.
(f) Neither DCS nor any Existing PC is now nor has ever been a
party to any Tax allocation or sharing agreement that could result in any
liability to Castle West.
9.15 INSURANCE. Set forth in SCHEDULE 9.15 is a complete list of
insurance policies that DCS and each Existing PC maintains with respect to its
Business and properties or on its employees. Such policies are in full force and
effect, are free from any right of termination on the part of the insurance
carriers arising from any event that has already occurred. DCS believes that
such policies, with respect to their amounts and types of coverage, are adequate
to insure against risks to which DCS, the Existing PCs and their Assets are
normally exposed in the operation of the Business, subject to customary
deductibles and policy limits.
9.16 INTELLECTUAL PROPERTIES. SCHEDULE 9.16 sets forth all material
Intellectual Property used by DCS and the Existing PCs in the Business and the
owner of such Intellectual Property. The operation of the Business as conducted
by DCS as of the Closing Date requires no rights under Intellectual Property
other than rights under Intellectual Property listed on SCHEDULE 9.16 and rights
granted to DCS pursuant to agreements listed on SCHEDULE 9.16. Except as
otherwise set forth in SCHEDULE 9.16, as of the Closing Date, DCS will own all
right, title and interest in the Intellectual Property listed in SCHEDULE 9.16.
No litigation is pending or, to the knowledge of DCS, threatened wherein DCS or
any Existing PC is accused of infringing or otherwise violating the Intellectual
Property rights of another, or of breaching a contract conveying rights under
Intellectual Property.
9.17 COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE 9.17, DCS and
each of the Existing PCs operates its business in conformity, in all material
respects, with all applicable statutes, common laws, ordinances, decrees,
orders, rules and regulations of governmental bodies including, without
limitation, those relating to the practice of dentistry (including the
management or operation of dental offices), the splitting of professional fees
with non-dentists, the ownership or control of the assets of a dental practice,
the employment of dentists, orthodontists, other dental specialists or other
personnel, the content of advertising, the making of payments in consideration
for referrals of patients, limitations on tasks that may be delegated by a
dentist to other staff members, the business of insurance and reimbursement by
governmental agencies. Except as set forth on SCHEDULE 9.17, DCS is not aware of
any existing or imminent matter which could reasonably be expected to have a
Material Adverse Effect. Except as set forth on SCHEDULE 9.17, DCS'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 dentistry-related goods or services, or laws respecting financial
interests held by dentists in entities to which they may refer patients for the
provision of dentistry-related goods or services.
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9.18 EMPLOYMENT RELATIONS. (a) Neither DCS nor any Existing PC is or has
engaged in any unfair labor practice; (b) to the knowledge of DCS, no
representation question exists respecting the employees of DCS or any Existing
PC; (c) neither DCS nor any Existing PC has been notified of any grievance that
could reasonably be expected to have a Material Adverse Effect and no
arbitration proceeding arising out of or under any collective bargaining
agreement is pending; and(d) no collective bargaining agreement is currently
being negotiated by DCS or any Existing PC.
9.19 EMPLOYEE BENEFIT PLANS. DCS has delivered to CDC true and complete
copies of all employee benefit plans, policies, programs and arrangements and
all related contracts, agreements and other descriptions thereof with respect to
the employee benefits provided to the employees of the Business prior to the
Closing Date (the "Plans"). Each of the Plans has, to the knowledge of DCS, been
maintained in compliance with its terms and the requirements of all applicable
laws. None of the Plans is subject to Title IV of ERISA or the minimum funding
obligations of Section 912 of the Code, and neither DCS nor any entity required
to be aggregated therewith pursuant to Section 414(b) or (c) of the Code has any
liability under Title IV of ERISA or under Section 412(f) or 412(n) of the Code.
9.20 ENVIRONMENTAL LAWS AND REGULATIONS. Except as set forth in SCHEDULE
9.20, (a) Hazardous Materials have not been generated, used, treated or stored
on, or transported to or from, any Property by DCS or the Existing PCs, their
authorized agents or their independent contractors (including suppliers) or any
property adjoining any Property, (b) Hazardous Materials have not been Released
or disposed of by DCS or the Existing PCs, their authorized agents or their
independent contractors (including suppliers) on any Property or any property
adjoining any Property except such Releases which do not violate any
Environmental Laws, (c) DCS is in compliance with all applicable Environmental
Laws and the requirements of any Permits issued under such Environmental Laws
with respect to any Property, (d) there are no pending or, to the knowledge of
DCS, threatened Environmental Claims against DCS, the Existing PCs or any
Property, (e) there are no facts or circumstances, conditions, pre-existing
conditions or occurrences on any Property known to DCS that could reasonably be
expected (A) to form the basis of an Environmental Claim against DCS or any
Property or (B) to cause such Property to be subject to any restrictions on its
ownership, occupancy, use or transferability under any Environmental Law, (f) to
the knowledge of DCS, there are not now and there never have been any
underground storage tanks located on any Property, and (g) neither DCS nor any
Existing PC has transported or stored Hazardous Materials.
9.21 INTERESTS IN CUSTOMERS. SUPPLIERS. ETC. Except as set forth in
SCHEDULE 9.21 or for relationships with Affiliates, DCS does not possess,
directly or indirectly, any financial interest in, and no DCS officer, director
or Member serves as a director, officer or employee of, any person which is a
supplier, customer, lessor, lessee, or competitor of DCS.
9.22 COMPENSATION OF EMPLOYEES. Set forth in SCHEDULE 9.22 is an
accurate and complete list showing the names of all persons whose compensation
from DCS or the Existing PCs for the period ended on the Balance Sheet Date
exceeded an annualized rate of $20,000, together with a
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statement of the full amount paid or payable to each such person for services
rendered during the current fiscal year to date.
9.23 PAYORS. SCHEDULE 9.23 sets forth the ten largest payors of DCS and
the Existing PCs for the most recently completed fiscal year. To the knowledge
of DCS, the relationship of DCS and the Existing PCs with each such payor as of
the date of this Agreement is a good commercial working relationship, and except
as set forth in SCHEDULE 9.23 no significant payor has canceled or otherwise
terminated or, to the knowledge of DCS, threatened to cancel or otherwise
terminate its relationship with DCS or the Existing PCs within the last three
years.
9.24 ACCOUNTS RECEIVABLE: ACCOUNTS PAYABLE. Except as set forth on
SCHEDULE 9.24, the Accounts Receivable are collectible in the ordinary course of
business, net of the reserves established with respect thereto. Except as set
forth on SCHEDULE 9.24, there has been no material change since the Balance
Sheet Date (other than in the ordinary course of business) in the amount of the
Accounts Receivable or other fees or debts due to DCS or the Existing PCs or the
allowances with respect thereto, or in the amount of Accounts Payable of DCS or
the Existing PCs, from that disclosed to CDC and Castle.
9.25 DISCLOSURE. None of this Agreement, the Financial Statements, any
Schedule, Exhibit or certificate attached hereto or delivered in accordance with
the terms hereof contains any untrue statement of a material fact, or omits any
statement of a material fact necessary in order to make the statements contained
herein or therein not misleading in light of the circumstances under which they
were made.
9.26 BROKER'S OR FINDER'S FEES. Other than the fee payable to TR
Capital, no agent, broker, Person or firm acting on behalf of DCS is, or will
be, entitled to any fee, commission or broker's or finder's fees in connection
with this Agreement or any of the transactions contemplated hereby.
9.27 COPIES OF DOCUMENTS. DCS has caused to be made available for
inspection, review and copying by Castle and its advisers, true, complete and
correct copies of all documents referred to in this Article IX or in any
Schedule attached hereto.
9.28 SUBSEQUENT EVENTS. Subsequent to September 30, 1997, DCS has not
sustained any material loss or interference with its business or properties from
fire, flood, hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, which is not disclosed in the Financial Statements; and subsequent to
the respective dates as of which information is given in the Financial
Statements, there has not been any material adverse change, or any development
involving a prospective material adverse change, in the general affairs,
management, business, prospects, financial position, net worth or results of
operations of DCS or any Existing PC, except in each case as described in the
Financial Statements.
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9.29 ACCOUNTING CONTROLS. DCS's system of internal accounting controls
is sufficient to meet the broad objectives of internal accounting controls
insofar as those objectives pertain to the prevention or detection of errors or
irregularities in amounts that would be material in relation to DCS's financial
statements, its Accounts Receivable and its Accounts Payable.
9.30 UNAUTHORIZED USE OF FUNDS. Neither DCS nor any of the Existing PCs,
nor to the knowledge of DCS, any director, officer, agent, employee or other
person acting on behalf of DCS has (i) used, or authorized the use of, any
corporate or other funds for unlawful payments, contributions, gifts or
entertainment, (ii) made unlawful expenditures relating to political activity to
government officials or others, or (iii) established or maintained any unlawful
or unrecorded funds in violation of any federal, state, local or foreign law or
regulation, including Section 30A of the Exchange Act. Neither DCS nor, to the
knowledge of DCS, any director, officer, agent, employee or other person acting
on behalf of DCS has accepted or received any unlawful contributions, payments,
gifts or expenditures.
ARTICLE X
REPRESENTATIONS AND WARRANTIES
OF CASTLE AND CDC
Castle and CDC jointly and severally represent and warrant to DCS,
Holdings, the DCS Members, the Holdings Members, the Corporate B Members and the
Corporate C Members as follows:
10.1 EXISTENCE AND GOOD STANDING: POWER AND AUTHORITY. Castle and each
subsidiary of Castle (as used herein, the term "subsidiary" includes any
corporation, limited liability company, joint venture, partnership or other
entity in which Castle or any subsidiary of Castle (including CDC) has a direct
or indirect ownership interest) is duly incorporated and validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization with full power and authority to own its properties and conduct its
business as now conducted and is duly qualified or authorized to do business and
is in good standing in all jurisdictions wherein the nature of its business or
the character of property owned or leased may require it to be authorized or
qualified to do business except where the absence of which would have a Material
Adverse Effect. Castle and each subsidiary holds all licenses, consents and
approvals, and has satisfied all eligibility and other similar requirements
imposed by federal and state regulatory bodies, administrative agencies or other
governmental bodies, agencies or officials, in each case as required for the
conduct of the business in which it is engaged. Each of Castle and CDC has full
legal right, power and authority to enter into this Agreement and this Agreement
has been duly authorized, executed and delivered by Castle and CDC and
constitutes a valid and binding agreement of Castle and CDC enforceable against
Castle and CDC in accordance with its 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.
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10.2 NO VIOLATIONS. No consent, approval, authorization or order of any
court or governmental agency or body or third party is required for the
performance of this Agreement by Castle or any subsidiary or the consummation by
Castle or any subsidiary of the transactions contemplated hereby, except such as
have been obtained or may be required under the Securities Act or state Blue sky
laws. Except for the consent required under that certain registration rights
agreement dated as of December 18, 1995, with purchasers of Castle's Series A
Convertible Preferred Stock and certain other parties (the "Original
Registration Rights Agreement") to the demand registration rights contained in
the Registration Rights Agreement, the issuance of the Common Stock by Castle
contemplated by this Agreement, Castle's and CDC's performance of this Agreement
and the consummation of the transactions contemplated hereby will not result in
a breach or violation of, or conflict with, any of the terms or provisions of,
or constitute a default by Castle or any subsidiary or under, any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or instrument
to which Castle or any subsidiary is a party or to which Castle or any
subsidiary or any of their respective properties is subject, the certificate of
incorporation, bylaws or other governing instrument of Castle or any subsidiary
or any statute or any judgment, decree, order, rule or regulation of any court
or governmental agency or body applicable to Castle, any subsidiary or any of
their respective properties. Neither Castle or any subsidiary is in violation of
its certificate of incorporation, bylaws or other governing instrument or any
law, administrative rule or regulation or arbitrators' or administrative or
court decree, judgment or order or in violation or default (there being no
existing state of facts which with notice or lapse of time or both would
constitute a default) in the performance or observance of any material
obligation, agreement, covenant or condition contained in any contract,
indenture, deed of trust, mortgage, loan agreement, note, lease, agreement or
other instrument or Permit to which it is a party or by which it or any of its
properties is or may be bound.
10.3 CAPITAL STOCK. The capitalization of Castle as of September 30,
1997 is as set forth in its Quarterly Report on Form 10-Q for the period ended
September 30, 1997, filed with the Commission, and Castle's capital stock
conforms to the description thereof contained in the Prospectus. All the issued
shares of capital stock of Castle have been duly authorized and validly issued,
are fully paid and nonassessable. None of the issued shares of capital stock of
Castle have been issued in violation of any preemptive or similar rights. The
Common Stock issuable by Castle hereunder has been duly and validly authorized
and, upon issuance and delivery and payment therefor in the manner herein
described, will be validly issued, fully paid and nonassessable. Except as set
forth in the Prospectus, provided for herein or provided in other documents
pursuant to which Castle has agreed to acquire other dental practice businesses,
(i) Castle does not have outstanding any options to purchase, or any rights or
warrants to subscribe for, or any securities or obligations convertible into, or
any contracts or commitments to issue or sell, any shares of Common Stock and
(ii) there are no preemptive rights or other rights to subscribe for or to
purchase, or any restriction upon the transfer of, any shares of Common Stock
pursuant to Castle's certificate of incorporation, bylaws or any agreement or
other instrument to which Castle is a party or by which it may be bound.
10.4 LITIGATION. Except as described in the Prospectus, there is not
pending, or to the knowledge of Castle threatened, any legal or governmental
action, suit, proceeding, inquiry or investigation, to which Castle, any of its
subsidiaries or any of their respective officers or directors
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is a party, or to which their respective property is subject, before or brought
by any court or governmental agency or body, wherein an unfavorable decision,
ruling or finding could prevent or materially hinder the consummation of this
Agreement or result in a material adverse change in the business condition
(financial or other), prospects, financial position, net worth or results of
operations of Castle or any of its subsidiaries.
10.5 COMPLIANCE WITH LAWS. Castle and each of its subsidiaries operates
its business in conformity, in all material respects, with all applicable
statutes, common laws, ordinances, decrees, orders, rules and regulations of
governmental bodies including, without limitation, those relating to the
practice of dentistry (including the management or operation of dental offices),
the splitting of professional fees with non-dentists, the ownership or control
of the assets of a dental practice, the employment of dentists, orthodontists,
other dental specialists or other personnel, the content of advertising, the
making of payments in consideration for referrals of patients, limitations on
tasks that may be delegated by a dentist to other staff members, the business of
insurance and reimbursement by governmental agencies. Castle and each of its
subsidiaries has all licenses, approvals, consents or Permits to operate its
businesses in all locations in which such businesses are currently being
operated, and, except as described in the Prospectus, such Permits contain no
restrictions that are materially burdensome. Castle is not aware of any existing
or imminent matter which may materially adversely impact its, any of its
subsidiaries' operations or business prospects other than as specifically
disclosed in the Prospectus. Each of the Professionals who is employed by or
affiliated with Castle has such Permits under 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, orthodontic and other
specialty dental care in such jurisdictions, the failure of which to have would
have a material adverse effect on Castle; each of such 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. Castle'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 dentistry-related goods or services, or laws respecting financial
interests held by dentists in entities to which they may refer patients for the
provision of dentistry-related goods or services.
10.6 FINANCIAL STATEMENTS. The historical financial statements, together
with the related schedules and notes, of Castle included in the Prospectus and
in its Exchange Act reports, conform to the requirements of the Securities Act
or the Exchange Act, as appropriate. Such historical financial statements fairly
present the financial position of Castle at the respective dates indicated in
accordance with generally accepted accounting principles applied on a consistent
basis for the periods indicated.
10.7 SUBSEQUENT EVENTS. Subsequent to September 30, 1997, Castle has not
sustained any material loss or interference with its business or properties from
fire, flood, hurricane, accident or
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other calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, which is not disclosed in the
Prospectus; and subsequent to the respective dates as of which information is
given in the Prospectus, there has not been any material adverse change, or any
development involving a prospective material adverse change, in the general
affairs, management, business, prospects, financial position, net worth or
results of operations of Castle, except in each case as described in the
Prospectus or the Exchange Act reports.
10.8 TITLE TO PROPERTY. Except as described in the Prospectus, Castle
and each of its subsidiaries has good and marketable title to all real and
material personal property owned by it, free and clear of all liens, charges,
encumbrances or defects, except those reflected in the financial statements
hereinabove described. The real and personal property and buildings referred to
in the Prospectus which are leased from others by Castle or its subsidiaries are
held under valid, subsisting enforceable leases. Castle or its subsidiaries owns
or leases all such properties as are necessary to their respective operations as
now conducted.
10.9 ACCOUNTING CONTROLS. Castle's system of internal accounting
controls is sufficient to meet the broad objectives of internal accounting
controls insofar as those objectives pertain to the prevention or detection of
errors or irregularities in amounts that would be material in relation to
Castle's financial statements.
10.10 TAXES. Castle and each of its subsidiaries has filed all foreign,
federal, state and local income and franchise tax returns required to be filed
through the date hereof and has paid all taxes shown as due therefrom to the
extent such taxes have become due and are not being contested in good faith; and
there is no tax deficiency that has been, nor does Castle have knowledge of any
tax deficiency which is likely to be, asserted against Castle, any of its
subsidiaries, which if determined adversely could materially and adversely
affect the earnings, assets, affairs, business prospects or condition (financial
or other) of Castle.
10.11 NO VIOLATION. Neither Castle nor any of its subsidiaries is in
material violation of any federal, state, local or foreign law or regulation
relating to occupational safety and health or to the storage, handling or
transportation of hazardous or toxic materials, and Castle and each of its
subsidiaries has received all Permits, licenses or other approvals required of
it under applicable federal, state and foreign occupational safety and health
and environmental laws and regulations to conduct its respective businesses, and
Castle and each of its subsidiaries is in compliance with all terms and
conditions of any such Permit, license or approval, except any such violation of
law or regulation, failure to receive required Permits, licenses or other
approvals or failure to comply with the terms and conditions of such Permits,
licenses or approvals which would not result in a material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
prospects of Castle.
10.12 REGULATORY COMPLIANCE. Neither Castle nor any of its subsidiaries
has failed to file with the applicable regulatory authorities any statements,
reports, information or forms required by all applicable laws, regulations or
orders; all such filings or submissions were in compliance with
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applicable laws when filed, and no deficiencies have been asserted by any
regulatory commission, agency or authority with respect to such filings or
submissions. Neither Castle nor any of its subsidiaries has failed to maintain
in full force and effect any licenses, registrations or Permits necessary or
proper for the conduct of its business, or received any notification that any
revocation or limitation thereof is threatened or pending, and there is not to
the knowledge of Castle pending any change under any law, regulation, license or
Permit which could materially adversely affect the business, operations,
property or business prospects of Castle. Neither Castle nor any of its
subsidiaries has received any notice of violation of or been threatened with a
charge of violating or is under investigation with respect to a possible
violation of any provision of any law, regulation or order.
10.13 EMPLOYEE RELATIONS. No labor dispute exists or is imminent with
any of the employees of Castle nor any of its subsidiaries or otherwise which
could materially adversely affect Castle or any of its subsidiaries. Castle is
not aware of any existing or imminent labor disturbance by employees of Castle,
any of its subsidiaries which could be expected to materially adversely affect
the condition (financial or otherwise), results of operations, properties,
affairs, management, business affairs or business prospects of Castle.
10.14 INTELLECTUAL PROPERTY. Castle and each of its subsidiaries owns
all licenses, copyrights, trademarks, service marks and trade names presently
employed by it in connection with the businesses proposed to be operated by it,
and neither Castle nor any of its subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect to any
of the foregoing which, alone or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, could result in any material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of Castle.
10.15 INSURANCE. Castle and each of its subsidiaries is insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which it
is engaged and in which it proposes to engage; and neither Castle nor any of its
subsidiaries has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a comparable cost.
10.16 UNAUTHORIZED USE OF FUNDS. Neither Castle nor any of its
subsidiaries, nor to the knowledge of Castle, any director, officer, agent,
employee or other person acting on behalf of Castle has (i) used, or authorized
the use of, any corporate or other funds for unlawful payments, contributions,
gifts or entertainment, (ii) made unlawful expenditures relating to political
activity to government officials or others, or (iii) established or maintained
any unlawful or unrecorded funds in violation of any federal, state, local or
foreign law or regulation, including Section 30A of the Exchange Act. Neither
Castle nor, to the knowledge of Castle, any director, officer, agent, employee
or other person acting on behalf of Castle has accepted or received any unlawful
contributions, payments, gifts or expenditures.
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10.17 BROKER'S OR FINDER'S FEES. Other than the GulfStar Group, no
agent, broker, Person or firm acting on behalf of Castle or CDC is, or will be,
entitled to any fee, commission or broker's or finder's fee in connection with
this Agreement or any of the transactions contemplated hereby.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES OF MEMBERS
Each DCS Member and his or her Corporate B Member jointly and severally
represent and warrant (with such representations and warranties being joint and
several only with respect to such DCS Member and his or her Corporate B Member,
not with respect to any other Member, whose representations and warranties are
several and not joint) to Castle and CDC, and each Holdings Member and his or
her Corporate C Member jointly and severally represent and warrant (with such
representations and warranties being joint and several only with respect to such
Holdings Member and his or her Corporate C Member, not with respect to any other
Member, whose representations and warranties are several and not joint) to
Castle and CDC as follows (each of the representations and warranties by or with
respect to a Corporate B Member, Corporate C Member or Holdings Member shall
only be made after the formation thereof and the execution and delivery by each
of such Members of this Agreement):
11.1 AUTHORIZATION AND VALIDITY OF AGREEMENT. Each Member has full power
and authority to execute and deliver this Agreement, to perform its respective
obligations hereunder and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by each Corporate B
Member and Corporate C Member and the consummation by them of the transactions
contemplated hereby, have been duly authorized and approved by the Board of
Directors of such Member, and no other action on the part of any Member is
necessary to authorize the execution, delivery and performance of this Agreement
by such Member or the consummation of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by each Member and is a valid and
binding obligation of each such Member enforceable against each in accordance
with its 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.
11.2 MEMBERSHIP INTERESTS. The outstanding membership interest in DCS
set forth next to each DCS Member's name on Schedule B hereto is owned
beneficially and of record by such DCS Member free and clear of any
Encumbrances. Except as contemplated by this Agreement, no outstanding options,
warrants or rights to acquire membership interests in DCS exist. Upon issuance
in accordance with the terms of this Agreement, the membership interest in
Holdings set forth next to each Holdings Member's name on Schedule B hereto will
be owned beneficially and of record by such Holdings Member free and clear of
any Encumbrances. All of the outstanding membership interests in Holdings have
been duly and validly authorized and upon issuance in accordance with the terms
of this Agreement, will be fully paid and nonassessable. Except as contemplated
by this
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Agreement, no outstanding options, warrants or rights to acquire membership
interests in Holdings exist.
11.3 CAPITAL STOCK. Each Corporate B Member and Corporate C Member is a
corporation duly organized and validly existing under the laws of the state of
its incorporation. All of the outstanding shares of capital stock of each
Corporate B Member and each Corporate C Member are owned beneficially and of
record by the DCS Member or Holdings Member listed next to such Member's name on
Schedule A hereto free and clear of any Encumbrances. All of the shares of
capital stock of each DCS Member's Corporate B Member and each Holdings Member's
Corporate C Member have been duly and validly authorized and issued, and are
fully paid and nonassessable. No outstanding options, warrants or rights to
acquire capital stock of any DCS Member's Corporate B Member or any Holdings
Member's Corporate C Member exist.
11.4 STATUS OF CORPORATE B MEMBERS AND CORPORATE C MEMBERS. Each
Corporate B Member has been recently formed by the DCS Member set forth opposite
its name on Schedule A hereto and prior to the date hereof has conducted no
business operations other than those necessary to consummate the transactions
contemplated herein. Each Corporate C Member has been recently formed by the
Holdings Member set forth opposite its name on Schedule A hereto and prior to
the date hereof has conducted no business operations other than those necessary
to consummate the transactions contemplated herein.
11.5 MEMBERSHIP INTERESTS FOLLOWING CONTRIBUTION. Following the
contribution of each DCS Member's membership interest in DCS to such DCS
Member's Corporate B Member in accordance with the terms of this Agreement, the
membership interest in DCS set forth next to such DCS Member's name on Schedule
B hereto will be owned beneficially and of record by such DCS Member's Corporate
B Member free and clear of any Encumbrances. Following the contribution of each
Holdings Member's membership interest in Holdings to such Holdings Member's
Corporate C Member in accordance with the terms of this Agreement, the
membership interest in Holdings set forth next to such Holdings Member's name on
Schedule B hereto will be owned beneficially and of record by such Holdings
Member's Corporate C Member free and clear of any Encumbrances.
11.6 CONSENTS AND APPROVALS: NO VIOLATIONS. Except as set forth on
SCHEDULE 11.6, the execution, delivery and performance of this Agreement by each
Member and the consummation by any such Member of the transactions contemplated
hereby will not, with or without the giving of notice or the lapse of time or
both: (a) violate, conflict with, or result in a breach or default under any
provision of the organizational documents of such Member; (b) violate any
statute, ordinance, rule, regulation, order, judgment or decree of any court or
of any governmental or regulatory body, agency or authority applicable to such
Member by which any of such Member's properties or assets may be bound; (c)
require any filing by such Member with, or require such Member to obtain any
Permit, consent or approval of, or require such Member to give any notice to,
any governmental or regulatory body, agency or authority other than as set forth
in SCHEDULE 11.6 attached hereto or as may be required under the Securities Act
or state Blue sky laws; or (d) result in a violation or breach by such Member
of, conflict with, constitute (with or without due notice or lapse of time or
both) a default
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by such Member (or give rise to any right of termination, cancellation, payment
or acceleration) under or result in the creation of any Encumbrance upon any of
the properties or assets of such Member under any of the terms, conditions, or
provisions of any note, bond, mortgage, indenture, license, franchise, Permit,
agreement, lease, franchise agreement or other instrument or obligation to which
such Member is a party, or by which such Member or any of its properties or
assets may be bound.
11.7 LITIGATION. Except as set forth on SCHEDULE 11.7, There is no
action, suit, proceeding at law or in equity, arbitration or administrative or
other proceeding by or before (or, to the knowledge of such Member, any
investigation by) any governmental or other instrumentality or agency, pending,
or, to the knowledge of any Member, threatened, against or affecting the
properties, rights or goodwill of such Member or its employees, except where
such Proceeding would not have a material adverse effect on such Member and such
Member knows of no valid basis for any such action, proceeding or investigation.
There are no such Proceedings pending or, to the knowledge of such Member,
threatened, seeking to prevent or challenge the transactions contemplated by
this Agreement.
11.8 COMPLIANCE WITH LAWS. To the knowledge of each Member, such Member
is in compliance with all applicable laws, regulations, orders, judgments and
decrees applicable to its business, except where any noncompliance would not
have a material adverse effect on such Member.
11.9 INVESTMENT REPRESENTATIONS.
(a) Each DCS Member and Holdings Member understands that the
Common Stock and the Notes (collectively, the "Securities") have not
been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and are being offered and sold pursuant to an
exemption from registration contained in the Securities Act based in
part upon the representations of such Members contained in this
Agreement.
(b) Each DCS Member and Holdings Member, in consultation with his
or her accountants, attorneys and financial advisors, has the requisite
experience in evaluating and investing in private placement transactions
of securities so that he or she is capable of evaluating the merits and
risks of his or her investment in Castle and has the capacity to protect
his or her own interests. Each DCS Member and Holdings Member
understands that he or she must bear the economic risk of this
investment indefinitely unless the Securities are registered pursuant to
the Securities Act or unless an exemption from registration is
available. Each DCS Member and Holdings Member also understands that
there is no assurance that any exemption from registration under the
Securities Act will be available and that, even if available, such
exemption may not allow him or her to transfer all or any portion of the
Securities under the circumstances, in the amounts or at the times it
might propose.
(c) Each DCS Member and Holdings Member who acquires Securities
pursuant to any of the transactions contemplated by this Agreement is
acquiring such Securities for his or her own account for investment
only, and not with a view towards distribution.
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(d) Each DCS Member and Holdings Member represents that by reason
of his or her business or financial experience, he or she has the
capacity to protect his or her own interests in connection with the
transactions contemplated in this Agreement.
(e) Each DCS Member and Holdings Member represents that he or she
is an accredited investor within the meaning of Regulation D under the
Securities Act.
(f) Each DCS Member and Holdings Member acknowledges that the
Securities have been offered to such Member without any form of general
solicitation or advertising of any type by or on behalf of Castle or any
of its officers, directors, shareholders, employees, agents, attorneys
or representatives.
(g) Each DCS Member and Holdings Member has reached the age of
majority in the state in which such Member resides, has adequate means
of providing for such Member's current financial needs and
contingencies, is able to bear the substantial economic risks of an
investment in the Securities, has no need for liquidity in such
investment, and is able to withstand a complete loss of such investment.
(h) Each DCS Member and Holdings Member acknowledges and
understands that no federal or state agency has passed on the fairness
of the investment in the Securities, nor made any recommendation or
endorsement of the Securities, and that there is a significant risk of
loss of all or a portion of such Member's investment in the Securities.
(i) Each DCS Member and Holdings Member acknowledges that Castle
and Castle's officers, directors, agents, attorneys and other
representatives are relying on the representations and warranties set
forth herein, and would not issue the Securities to such Member but for
the execution and delivery of this Agreement by such Member.
11.10 DISCLOSURE. Each DCS Member and Holdings Member acknowledges
receipt of a copy of Castle's prospectus dated September 12, 1997 (the
"Prospectus"), relating to Castle's initial public offering of its Common Stock.
Each DCS Member and Holdings Member has carefully reviewed the Prospectus and
has been given the opportunity to discuss any questions relating thereto with
members of Castle's management. Each DCS Member and Holdings Member has also
received a copy of Castle's Report on Form 10-Q for the quarter ended September
30, 1997, in the form filed with the Commission.
ARTICLE XII
CONDITIONS TO OBLIGATIONS OF DCS AND THE MEMBERS
Subject to the satisfaction of the conditions to closing set forth
herein, the closing (the "Closing") of the transactions contemplated in Section
2.1, Section 2.2, Section 2.4, Section 3.1, Article IV, Article V and Section
6.1 hereof shall be held at the offices of ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇
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Incorporated, Nine ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ on or before
March 31, 1998, or such other place, date and time as may be mutually agreed
upon by the parties hereto. Such time and date are referred to herein as the
"Closing Date."
The obligations of DCS and the Members to consummate the transactions
contemplated hereby shall be subject to the satisfaction (or waiver by the party
entitled to performance) on or prior to the Closing Date of all of the following
conditions:
12.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Castle and CDC contained in this Agreement shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
the Closing Date, and each of Castle and CDC shall have delivered to DCS on the
Closing Date a certificate of an authorized officer, dated the Closing Date, to
such effect.
12.2 PERFORMANCE OF AGREEMENTS. Each and all of the agreements and
covenants of Castle and CDC to be performed on or before the Closing Date
pursuant to the terms hereof shall have been duly performed in all material
respects, and each of Castle and CDC shall have delivered to DCS a certificate
of an authorized officer, dated the Closing Date, to such effect.
12.3 NO LITIGATION THREATENED. No action or proceedings shall have been
instituted before a court or other governmental body or by any public authority
to restrain or prohibit any of the transactions contemplated hereby, and each of
Castle and CDC shall have delivered to DCS a certificate of an authorized
officer, dated the Closing Date, to such effect to the best knowledge of such
officer.
12.4 GOVERNMENTAL APPROVALS. All governmental consents and approvals, if
any, necessary to permit the consummation of the transactions contemplated by
this Agreement shall have been received other than any filings required to
register any of the shares of Common Stock issuable hereunder under the
Securities Act or pursuant to state Blue Sky laws or filings required to include
such shares of Common Stock on the Nasdaq National Market.
12.5 PROCEEDINGS. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory in form and substance to DCS and its counsel,
and DCS shall have received copies of all such documents and other evidence as
it or its counsel may reasonably request in order to establish the consummation
of such transactions and the taking of all proceedings in connection therewith.
12.6 SECRETARY'S AND GOOD STANDING CERTIFICATES. DCS shall have received
a certificate of the secretary or any assistant secretary of each of Castle and
CDC certifying as to the following attachments: (a) its articles of
incorporation (certified by the Secretary of State of or other appropriate
governmental authority of its state of incorporation); (b) its bylaws; (c) the
resolutions of its board of directors respecting the transactions contemplated
hereby; and (d) a certificate respecting the incumbency and true signatures of
its officers who executed this Agreement and any
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related documents. DCS shall have received recently dated good standing and
existence certificates respecting Castle, CDC and Castle West.
12.7 REGISTRATION RIGHTS AGREEMENT. Each DCS Member and Holdings Member
shall have entered into and delivered a Registration Rights Agreement with
Castle.
12.8 LEGAL OPINION. Castle shall have delivered to DCS an opinion of its
counsel in form and substance reasonably satisfactory to DCS and its counsel.
12.9 CONSENTS. Each of the consents referred to in SCHEDULE 9.4 attached
hereto shall have been obtained. The consent of Castle's lender and the
appropriate parties to the Original Registration Rights Agreement shall have
been obtained.
12.10 EXHIBITS AND SCHEDULES. The parties hereto shall have agreed to
the final form of each of the Exhibits and Schedules to be attached hereto and
incorporated herein by reference.
12.11 FORMATION OF ENTITIES. The parties hereto shall have formed CDC,
Castle West, Holdings, the Corporate B Members and the Corporate C Members and
each of them shall have executed a counterpart of this Agreement and agreed to
be bound by the terms hereof.
12.12 SHAREHOLDERS' AGREEMENT. CDC, DCS, Holdings and each of the
Members shall have entered into and delivered the Shareholders' Agreement.
12.13 CASTLE BOARD APPROVAL. Castle's board of directors shall approved
the execution of this Agreement and the agreements contemplated hereby and shall
have authorized the issuance of, and reserved for issuance, the shares of Common
Stock issuable hereunder and thereunder.
ARTICLE XIII
CONDITIONS TO CASTLE'S AND CDC'S OBLIGATIONS
The obligations of Castle and CDC under this Agreement to consummate the
transactions contemplated hereby shall be subject to the satisfaction (or waiver
by Castle and CDC) on or prior to the Closing Date of all of the following
conditions:
13.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of DCS and each Member contained in this Agreement shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
the Closing Date; and DCS and each Member shall have delivered to Castle and CDC
on the Closing Date a certificate of an authorized officer or representative, as
appropriate, dated the Closing Date, to such effect.
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13.2 PERFORMANCE OF AGREEMENTS. Each and all of the agreements and
covenants of DCS and each Member to be performed on or before the Closing Date
pursuant to the terms hereof shall have been duly performed in all material
respects, and DCS and each Member shall have delivered to Castle and CDC a
certificate of an authorized officer or representative, as appropriate, dated
the Closing Date, to such effect.
13.3 NO LITIGATION THREATENED. No action or proceedings shall have been
instituted before a court or other governmental body or by any public authority
to restrain or prohibit any of the transactions contemplated hereby, and DCS and
each Member shall have delivered to Castle and CDC a certificate of an
authorized officer or representative, as appropriate, dated the Closing Date, to
such effect to the best knowledge of such officer or representative.
13.4 GOVERNMENTAL APPROVALS. All governmental consents and approvals, if
any, necessary to permit the consummation of the transactions contemplated by
this Agreement shall have been received other than any filings required to
register any of the shares of Common Stock issuable hereunder under the
Securities Act or pursuant to state Blue Sky laws or filings required to include
such shares of Common Stock on the Nasdaq National Market.
13.5 CONSENTS. Each of the consents referred to in SCHEDULE 9.4 attached
hereto shall have been obtained, and Castle shall have also received the consent
of all other parties, including its senior lender and the parties to the
Original Registration Rights Agreement (to the extent required), whose consent
is required to permit Castle to perform its obligations hereunder.
13.6 LEGAL OPINION. DCS shall have delivered to CDC and Castle an
opinion of its counsel in form and substance reasonably satisfactory to Castle
and its counsel.
13.7 PROCEEDINGS. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory in form and substance to CDC and its counsel,
and CDC shall have received copies of all such documents and other evidence as
it or its counsel may reasonably request in order to establish the consummation
of such transactions and the taking of all proceedings in connection therewith.
13.8 DUE DILIGENCE. CDC shall have satisfactorily completed a due
diligence review of DCS, the Existing PCs and the Business and shall not have
determined, in the exercise of its reasonable discretion, that the information
obtained from such review materially and adversely affects its appraisal of the
business, prospects and financial condition of DCS and the Existing PCs taken as
a whole or the Business.
13.9 SECRETARY'S AND GOOD STANDING CERTIFICATES. Castle and Purchase
shall have received a certificate of the secretary or any assistant secretary of
DCS and each Corporate B Member and Corporate C Member certifying as to the
following attachments: (a) its articles or certificate of incorporation or
organization (certified by the Secretary of State of or other appropriate
governmental authority of its state of incorporation or organization); (b) its
bylaws or operating
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agreement; (c) the resolutions of its board of directors (or similar governing
body) respecting the transactions contemplated hereby; and (d) a certificate
respecting the incumbency and true signatures of its officers (or other
representatives) who executed this Agreement and any related documents. Castle
and CDC shall have received recently dated good standing and existence
certificates respecting Castle West, Holdings, DCS and each Corporate B Member
and Corporate C Member.
13.10 SHAREHOLDERS' AGREEMENT. Each Member, DCS, Holdings and CDC shall
have entered into a Shareholders' Agreement.
13.11 ACQUISITION OF ASSETS OF THE EXISTING PCS. DCS shall have acquired
all of the Assets of the Existing PCs other than Excluded Assets and shall have
assumed all of the Liabilities of the Existing PCs other than Excluded
Liabilities. DCS shall have entered into "market value" leases of the real
property owned by the Existing PCs on terms and conditions reasonably acceptable
to CDC.
13.12 NON-COMPETITION AGREEMENT. Each DCS Member shall have entered into
a Non-Competition Agreement.
13.13 EXHIBITS AND SCHEDULES. The parties hereto shall have agreed to
the final form of each of the Exhibits and Schedules to be attached hereto and
incorporated herein.
13.14 FORMATION OF ENTITIES. The parties hereto shall have formed CDC,
Castle West, Holdings, the Corporate B Members and the Corporate C Members and
each of them shall have executed a counterpart of this Agreement and agreed to
be bound by the terms hereof.
13.15 SUBORDINATION AGREEMENT. DCS shall have entered into the
Subordination Agreement.
ARTICLE XIV
COVENANTS OF DCS AND THE MEMBERS
DCS and each Member hereby covenants and agrees with CDC and Castle as
follows:
14.1 COOPERATION BY DCS AND THE MEMBERS. DCS and the Members shall use
their reasonable best efforts to cooperate with CDC and Castle to secure all
necessary consents, approvals, authorizations, exemptions and waivers from third
parties as shall be required in order to enable DCS and the Members to effect
the transactions contemplated on their part hereby, and DCS and the Members
shall otherwise use their reasonable best efforts to cause the consummation of
such transactions in accordance with the terms and conditions hereof and to
cause all conditions contained in this Agreement over which they have control to
be satisfied. DCS and the Members further agree to deliver to CDC and Castle
prompt written notice of any event or condition which if it existed on the date
of this Agreement, would result in any of the representations and warranties of
DCS or any Member contained herein being untrue in any material respect.
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14.2 CONDUCT OF BUSINESS. Except as CDC may otherwise consent to in
writing, between the date hereof and the Closing Date, DCS shall, (a) conduct
the Business only in the ordinary course, (b) use reasonable efforts to keep
available the services of its employees and maintain satisfactory relationships
with licensors, suppliers, lessors, distributors, customers, clients and others
with respect to the Business, (c) maintain, consistent with past practice and
good business judgment, all its material assets in customary repair, order and
condition, ordinary wear and tear excepted, and insurance upon all its material
assets used in the conduct of the Business in such amounts and of such kinds
comparable to that in effect on the date hereof, to the extent available at
current premiums, and (d) maintain its books and records in the usual, regular
and ordinary manner, on a basis consistent with past practice. DCS shall be
allowed, however, to distribute its net profits arising prior to the Closing
Date to the DCS Members so long as such distribution does not result in the
Business having a shortage of available cash necessary to carry on its
operations consistent with past practice.
14.3 EXCLUSIVE DEALING. During the period from the date of this
Agreement to the earlier of the Closing Date or the termination of this
Agreement, none of DCS and the Members shall take any action to, directly or
indirectly, encourage, initiate or engage in discussions or negotiations with,
or provide any information to, any Person other than Castle or its Affiliates,
concerning any sale of the Assets or the Business or any material part thereof
or a similar transaction involving any of DCS or the Members.
14.4 REVIEW OF THE ASSETS. CDC may, prior to the Closing Date, through
its representatives, review (a) the assets of DCS and the Existing PCs, (b) the
complete working papers of DCS's and the Existing PCs' certified public
accountants used in their preparation of financial statements for DCS and the
Existing PCs and (c) the books and records of DCS and the Existing PCs and to
otherwise review the financial and legal condition of DCS and the Existing PCs
as CDC deems necessary or advisable to familiarize itself with the Business and
related matters. Such review shall occur only during normal business hours upon
reasonable notice by CDC. DCS shall permit CDC and its representatives to have,
after the execution of this Agreement, full access to employees of DCS and the
Existing PCs who can furnish CDC with financial and operating data and other
information with respect to the Business as CDC shall from time to time
reasonably request.
14.5 ACQUISITION OF ASSETS OF THE EXISTING PCS. Prior to the Closing,
DCS shall acquire all of the Assets of the Existing PCs other than Excluded
Assets and shall assume all of the Liabilities of the Existing PCs other than
Excluded Liabilities. DCS shall enter into "market value" leases of the real
property owned by the Existing PCs on terms and conditions reasonably acceptable
to CDC.
14.6 FORMATION OF ENTITIES. Prior to the Closing, each DCS Member will
form a Corporate B Member and cause such Corporate B Member to enter into and
deliver this Agreement and perform its obligations hereunder and each Holdings
Member will form a Corporate C Member and cause such Corporate C Member to enter
into and deliver this
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Agreement and perform its obligations hereunder. At or prior to the Closing,
assuming all of the other conditions precedent to Closing have been met or
waived, CDC and DCS shall form Castle West and cause Castle West to enter into
and deliver this Agreement and the Holdings Members will form Holdings and cause
Holdings to enter into and deliver this Agreement and perform its obligations
hereunder.
14.7 EXHIBITS AND SCHEDULES. DCS and each of the Members agrees to use
its best efforts to negotiate, prepare and deliver final version of each of the
Exhibits and Schedules contemplated by this Agreement in order that all such
Exhibits and Schedules shall be finalized no later than March 23, 1998.
14.8 FURTHER ASSURANCES. At any time or from time to time after the
Closing Date, DCS shall, at the reasonable request of Castle West and at Castle
West's expense, execute and deliver any further instruments or documents and
take all such further action as Castle West may reasonably request in order to
consummate and make effective the contribution of the Assets and the assumption
of the Assumed Obligations pursuant to this Agreement or any other transaction
contemplated hereby.
14.9 HOLDINGS LIMITED AGREEMENT. Following the Closing, the Holdings
Members and the Corporate C Members shall not (i) amend the Holdings Limited
Agreement if the effect of such an amendment would be to materially interfere
with the economic expectations of CDC and Castle (based on the Holdings Limited
Agreement as in effect on the Closing Date) with respect to the Corporate C
Member's Merger Option or CDC's Call Option or CDC's ownership of membership
interests in Holdings on a going-forward basis arising as a result of the
exercise of the aforementioned options or (ii) vote to dissolve Holdings.
ARTICLE XV
COVENANTS OF CASTLE AND CDC
Castle and CDC hereby covenant and agree with DCS and the Members as
follows:
15.1 COOPERATION BY CASTLE AND CDC. Castle and CDC will use their
reasonable best efforts to cooperate with DCS and the Members, to secure all
necessary consents, approvals, authorizations, exemptions and waivers from third
parties as shall be required in order to enable Castle and CDC to effect the
transactions contemplated on their part hereby, and Castle and CDC shall
otherwise use their reasonable best efforts to cause the consummation of such
transactions in accordance with the terms and conditions hereof and to cause all
conditions contained in this Agreement over which they have control to be
satisfied. Castle and CDC further agree to deliver to DCS and the Members prompt
written notice of any event or condition, which if it existed on the date of
this Agreement, would result in any of the representations and warranties of
Castle and CDC contained herein being untrue in any material respect.
15.2 BOOKS AND RECORDS; PERSONNEL. At all times after the Closing Date,
CDC shall cause Castle West to allow DCS and any agents of any DCS, upon
reasonable advance notice to Castle West, access to all Books and Records of DCS
which are transferred to Castle West in connection
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herewith, to the extent necessary or desirable in anticipation of, or
preparation for, existing or future litigation, employment matters, tax returns
or audits, or reports to or filings with governmental agencies or similar
matters, during normal working hours at Castle West's principal places of
business or at any location where such Books and Records are stored, and DCS
shall have the right, at DCS's sole cost, to make copies of any such Books and
Records. CDC shall cause Castle West to maintain such books and records for a
period of no less than six years and, prior to the disposal or destruction
thereof, shall give DCS reasonable notice of such pending disposal or
destruction in order that DCS may retrieve such books and records from Castle
West.
15.3 FORMATION OF ENTITIES. Prior to the Closing, Castle will form and
cause CDC to enter into and deliver this Agreement and to perform its
obligations hereunder. At or prior to the Closing, assuming all of the other
conditions precedent to Closing have been met, CDC and DCS shall form Castle
West and cause Castle West to enter into and deliver this Agreement.
15.4 EXHIBITS AND SCHEDULES. Castle and CDC each agrees to use its best
efforts to negotiate, prepare and deliver final version of each of the Exhibits
and Schedules contemplated by this Agreement in order that all such Exhibits and
Schedules shall be finalized no later than March 23, 1998.
15.5 RESERVATION OF SHARES. Prior to the Closing, Castle shall reserve
for issuance out of its authorized but unissued shares, and thereafter keep so
reserved, such number of shares of Common Stock which may be issuable from time
to time upon the conversion of all of the capital stock of the Corporate B
Members and the Corporate C Members in accordance with the terms of this
Agreement. In addition, prior to the issuance of such shares, Castle shall use
its best efforts to include for trading, or list, all of such shares on the
Nasdaq National Market and on each securities exchange the shares of Common
Stock are then listed.
15.6 FURTHER ASSURANCES. At any time or from time to time after the
Closing Date, CDC shall cause Castle West, at the request of DCS and at DCS's
expense, to execute and deliver any further instruments or documents and take
all such further action as DCS may reasonably request in order to consummate and
make effective the contribution of the Assets and the assumption of the Assumed
Obligations pursuant to this Agreement or any other transaction contemplated
hereby. In the event that CDC fails for any reason to comply with any of its
obligations hereunder or in any of its obligations under any ancillary documents
executed in connection herewith, Castle hereby agrees, upon demand, to promptly
perform such obligations as if such obligation were the direct obligation of
Castle hereunder.
ARTICLE XVI
TERMINATION
16.1 TERMINATION. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing Date:
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(a) by the mutual written consent of Castle and DCS; or
(b) by Castle or DCS in writing without liability on the part of
the terminating party on account of such termination (provided the
terminating party is not otherwise in default or in breach of this
Agreement as to which liability shall continue), if the Closing Date
shall not have occurred on or before March 31, 1998; or
(c) by Castle and CDC, on the one hand, or DCS and the Members,
on the other hand, in writing, without liability on the part of the
terminating party on account of such termination (provided the
terminating party is not otherwise in default or breach of this
Agreement as to which liability shall continue), if the other party
shall (i) fail to perform in any material respects its or their
covenants or agreements contained herein required to be performed on or
prior to the Closing Date, or (ii) breach or have breached any of its
representations or warranties contained herein in any material respect.
16.2 EFFECT ON OBLIGATIONS. Termination of this Agreement pursuant to
this Article shall terminate all obligations of the parties hereunder, except
for the obligations under Sections 18.7 and 18.10 hereof and the obligations set
forth in the next succeeding sentence of this Section 16.2 and except as to any
default or breach of this Agreement by any party. Upon any termination of this
Agreement each party hereto shall return all documents, work papers and other
material of any other party relating to the transactions contemplated hereby,
and all copies of such materials, whether so obtained before or after the
execution hereof, to the party furnishing the same.
ARTICLE XVII
SURVIVAL AND INDEMNIFICATION
17.1 INDEMNIFICATION OF DCS. Castle and CDC, from and after the Closing
Date, jointly and severally, shall indemnify and hold DCS, Holdings, the Members
and their respective officers, directors, employees, agents, members,
stockholders, representatives and Affiliates (the "DCS Indemnitees") harmless
from and against any and all damages (including, without limitation, exemplary
damages and penalties, losses, deficiencies, costs, expenses, obligations,
fines, expenditures, claims and liabilities, including reasonable counsel fees
and reasonable expenses of investigation, defending and prosecuting litigation
(collectively, the "Damages")), suffered by any DCS Indemnitee as a result of,
caused by, arising out of, or in any way relating to (a) any misrepresentation,
breach of warranty, or nonfulfillment of any agreement or covenant on the part
of Castle or CDC under this Agreement or any misrepresentation in or omission
from any list, schedule, certificate, or other instrument furnished or to be
furnished to DCS by CDC or Castle pursuant to the terms of this Agreement, (b)
any liability or obligation (other than those for which Castle West is being
indemnified by DCS hereunder) which pertains to the ownership, operation or
conduct of the Business or Assets arising from any acts, omissions, events,
conditions or circumstances occurring on or after the Closing Date or (c) any
Assumed Obligation.
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17.2 INDEMNIFICATION OF CASTLE AND CDC. DCS, Holdings and the Members
(other than the Holdings Member or Corporate C Member, as appropriate, holding
the Class III Interest in Holdings), jointly and severally, shall indemnify and
hold Castle West, Castle and CDC and their respective officers, directors,
employees, agents, members, stockholders, representatives and Affiliates (the
"Castle Indemnitees") harmless from and against any and all Damages suffered by
any Castle Indemnitee as a result of, caused by, arising out of, or in any way
relating to (a) any misrepresentation, breach of warranty, or nonfulfillment of
any agreement or covenant on the part of DCS under this Agreement or any
misrepresentation in or omission from any list, schedule, certificate, or other
instrument furnished or to be furnished to CDC by DCS pursuant to the terms of
this Agreement, (b) any liability or obligation (other than those for which DCS
is being indemnified by Castle West hereunder and other than those relating to,
caused by, resulting from or arising from the Assumed Obligations) which
pertains to the ownership, operation or conduct of the Business or Assets
arising from any acts, omissions, events, conditions or circumstances occurring
before the Closing Date or (c) Excluded Liabilities.
17.3 INDEMNIFICATION OF CASTLE AND CDC. Each DCS Member and his or her
Corporate B Member jointly and severally shall indemnify and hold harmless the
Castle Indemnitees (with such obligation being joint and several only with
respect to such DCS Member and his or her Corporate B Member, not with respect
to any other Member, whose obligations are several and not joint), and each
Holdings Member and his or her Corporate C Member jointly and severally shall
indemnify and hold harmless the Castle Indemnitees (with such obligation being
joint and several only with respect to such Holdings Member and his or her
Corporate C Member, not with respect to any other Member, whose obligations are
several and not joint) from and against 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 misrepresentation, breach of warranty, or nonfulfillment of any
agreement or covenant on the part of such Member under this Agreement or any of
the ancillary agreements contemplated hereby.
17.4 LIMITATIONS ON INDEMNIFICATION. In no event shall (i) the aggregate
joint and several liability of DCS, Holdings and the Members under this
Agreement exceed 3.25 times the Adjusted Aggregate EBITDA (the "Ceiling Amount")
or (ii) the aggregate liability of each Member under this Agreement, exceed that
Member's Pro Rata Share of the Ceiling Amount. For purposes of determining the
amount of Damages, no effect will be given to any resulting Tax benefit to any
indemnified party. Notwithstanding the provisions of Section 17.1, neither
Castle nor CDC shall be required to indemnify or hold harmless any of the DCS
Indemnitees on account of any Damages unless the liability of Castle and CDC
with respect to such Damages, when aggregated with the liability of Castle and
CDC with respect to all other Damages, exceeds, and only to the extent the
aggregate amount of all those Damages does exceed, $100,000. Notwithstanding the
provisions of Sections 17.2 and 17.3, neither DCS, Holdings nor any Member shall
be required to indemnify or hold harmless any of the Castle Indemnitees on
account of any Damages unless the liability of DCS, Holdings and the Members
with respect to such Damages, when aggregated with the liability of DCS,
Holdings and the Members with respect to all other Damages, exceeds, and only to
the extent the aggregate amount of all those Damages does exceed, $100,000.
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17.5 DEMANDS. Each indemnified party hereunder agrees that promptly upon
its discovery of facts giving rise to a claim for indemnity under the provisions
of this Agreement, including receipt by it of notice of any demand, assertion,
claim, action or proceeding, judicial or otherwise, by any third party (such
third party actions being collectively referred to herein as the "Claim"), with
respect to any matter as to which it claims to be entitled to indemnity under
the provisions of this Agreement, it will give prompt notice thereof in writing
to the indemnifying party, together with a statement of such information
respecting any of the foregoing as it shall have. Such notice shall include a
formal demand for indemnification under this Agreement. The indemnifying party
shall not be obligated to indemnify the indemnified party with respect to any
Claim if the indemnified party failed to notify the indemnifying party thereof
in accordance with the provisions of this Agreement in sufficient time to permit
the indemnifying party or its counsel to defend against such matter and to make
a timely response thereto including, without limitation, any responsive motion
or answer to a complaint, petition, notice or other legal, equitable or
administrative process relating to the Claim, only insofar as such failure to
notify the indemnifying party has actually resulted in prejudice or damage to
the indemnifying party.
17.6 RIGHT TO CONTEST AND DEFEND. The indemnifying party shall be
entitled at its cost and expense to contest and defend by all appropriate legal
proceedings any Claim with respect to which it is called upon to indemnify the
indemnified party under the provisions of this Agreement; provided, that notice
of the intention so to contest shall be delivered by the indemnifying party to
the indemnified party within 20 days from the date of receipt by the
indemnifying party of written notice by the indemnified party of the assertion
of the Claim. Any such contest may be conducted in the name and on behalf of the
indemnifying party or the indemnified party as may be appropriate. Such contest
shall be conducted by reputable counsel employed by the indemnifying party
(subject to the approval of the indemnified party, such approval not to be
unreasonably withheld), but the indemnified party shall have the right but not
the obligation to participate in such proceedings and to be represented by
counsel of its own choosing at its sole cost and expense. The indemnifying party
shall have full authority to determine all action to be taken with respect
thereto; provided, however, that the indemnifying party will not have the
authority to subject the indemnified party to any obligation whatsoever, other
than the performance of purely ministerial tasks or obligations not involving
material expense. If the indemnifying party does not elect to contest any such
Claim, the indemnifying party shall be bound by the result obtained with respect
thereto by the indemnified party. At any time after the commencement of the
defense of any Claim, the indemnifying party may request in writing the
indemnified party to agree in writing to the abandonment of such contest or to
the payment or compromise by the indemnified party of the asserted Claim,
whereupon such action shall be taken unless the indemnified party determines
that the contest should be continued, and so notifies the indemnifying party in
writing within 15 days of such request from the indemnifying party. If the
indemnified party determines that the contest should be continued, the
indemnifying party shall be liable hereunder only to the extent of the amount
that the other party to the contested Claim had agreed in writing
unconditionally to accept in payment or compromise as of the time the
indemnifying party made its request therefor to the indemnified party.
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17.7 COOPERATION. If requested by the indemnifying party, the
indemnified party agrees to cooperate with the indemnifying party and its
counsel in contesting any Claim that the indemnifying party elects to contest
or, if appropriate, in making any counterclaim against the person asserting the
Claim, or any cross-complaint against any person, and the indemnifying party
will reimburse the indemnified party for any reasonable expenses incurred by it
in so cooperating.
17.8 RIGHT TO PARTICIPATE. The indemnified party agrees to afford the
indemnifying party and its counsel the opportunity to be present at, and to
participate in, conferences with all persons, including governmental
authorities, asserting any Claim against the indemnified party or conferences
with representatives of or counsel for such persons.
17.9 PAYMENT OF DAMAGES. The indemnifying party shall pay to the
indemnified party in immediately available funds any amounts to which the
indemnified party may become entitled by reason of the provisions of this
Agreement, such payment to be made within five days after any such amounts are
finally determined either by mutual agreement of the parties hereto or pursuant
to the final unappealable judgment of a court of competent jurisdiction.
17.10 RIGHT OF SETOFF. Castle, CDC and Castle West shall have the right
to set off any amounts owed by DCS, Holdings or any Member under this Article
XVII against any amount Castle, CDC or Castle West may owe any such party
pursuant to any section of this Agreement or any of the ancillary agreements
contemplated hereby; provided, however, that neither CDC nor Castle shall be
entitled to offset any such amounts against the payment of the B Merger
Consideration payable, directly or indirectly, to the stockholders of the
Corporate B Members in exchange for their interests in the Corporate B Members
pursuant to the B Merger.
17.11 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) Notwithstanding any investigation at any time made by or on
behalf of any party hereto, the representations and warranties set forth
herein and in any certificate delivered in connection herewith with
respect to any of those representations and warranties will survive the
Closing and the Closing Date until the day that is two years from the
Closing Date, whereupon they will terminate and expire, except that the
representations and warranties of the Stockholders which relate
expressly or by necessary implication to Taxes will survive until the
expiration of the applicable statutes of limitations (including all
periods of extension and tolling).
(b) After a representation and warranty has expired, as provided
in Section 17.11(a), no claim for Damages may be made or prosecuted by
any Person who would have been entitled to Damages on the basis of that
representation and warranty prior to its termination and expiration,
provided that no claim presented in writing for Damages to the Person or
Persons from which or whom those damages are sought on the basis of that
representation and warranty prior to its termination and expiration will
be affected in any way by that termination and expiration.
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(c) Each party agrees that, with respect to the nonfulfillment of
any covenant or agreement provided for herein, no claim for Damages may
be made or prosecuted by any Person who otherwise would have been
entitled to Damages on the basis of the failure of any party to perform
that covenant or agreement if such claim shall not have been brought
within two years of the date such covenant or agreement was required to
be performed.
(d) Other than as provided in (a) and (c) above, no claim for
Damages may be made or prosecuted by any Person who otherwise would have
been entitled to Damages if such claim shall not have been brought
within two years of the Closing Date.
ARTICLE XVIII
MISCELLANEOUS
18.1 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules) sets forth the entire understanding of the parties with respect to
the subject matter hereof. Any previous agreements or understandings (whether
oral or written) between the parties regarding the subject matter hereof are
merged into and superseded by this Agreement.
18.2 SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors of
the parties hereto; provided that (a) (except as permitted by and in accordance
with the Shareholders' Agreement) this Agreement, including the representations
and warranties herein, may not be assigned by DCS, Holdings or any Member
without the prior written consent of Castle and CDC and (b) this Agreement,
including the representations and warranties herein, may not be assigned by
Castle or CDC to any Person without the prior written consent of Holdings unless
(i) such assignment is part of the sale, exchange or other disposition of all,
or substantially all, of Castle's assets or securities or the merger of Castle
with another person or entity or (ii) Holdings was afforded a "First Right to
Negotiate" with regard to such assignment pursuant to the terms of the Castle
West Limited Agreement. Any assignment in violation of this Section 18.2 shall
not be effective to transfer any rights or obligations under this Agreement.
18.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
18.4 HEADINGS. The headings of the Articles, Sections and paragraphs of
this Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
18.5 MODIFICATION AND WAIVER. No amendment, modification or alteration
of the terms or provisions of this Agreement shall be binding unless the same
shall be in writing and duly executed by the parties hereto, except that any of
the terms or provisions of this Agreement may be waived in
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writing at any time by the party which is entitled to the benefits of such
waived terms or provisions. No waiver of any of the provisions of this Agreement
shall be deemed to or shall constitute a waiver of any other provision hereof
(whether or not similar) or any subsequent application of such provision. No
delay on the part of either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof.
18.6 NO THIRD PARTY BENEFICIARY RIGHTS. Except as provided in Article
XVII, this Agreement is not intended to and shall not be construed to give any
Person (other than the parties signatory hereto from time to time) any interest
or rights (including, without limitation, any third party beneficiary rights)
with respect to or in connection with any agreement or provision contained
herein or contemplated hereby.
18.7 EXPENSES. Except as otherwise provided in this Agreement, DCS,
Holdings, each Member, Castle and CDC shall each pay all costs and expenses
incurred by them or on their behalf in connection with this Agreement and the
transactions contemplated hereby.
18.8 NOTICE. Any notice, request, instruction or other document to be
given hereunder by any party hereto to any other party shall be sufficiently
given if delivered in person or sent by telecopier or registered or certified
mail, postage prepaid, return receipt requested, or by recognized overnight
courier, addressed as follows:
if to CDC, to:
Castle Dental Centers of California, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇
Nine ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
if to DCS or any Member to:
Dental Consulting Services, LLC
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, D.D.S., a Manager
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with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Kaye, Scholer, ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Handler, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address for a party as shall be specified by like notice, and
such notice or communication shall be deemed to have been duly given as of the
date so delivered, mailed or sent by telecopier.
18.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without regards to conflict of
law rules thereof.
18.10 CONFIDENTIALITY; PUBLICITY. The terms and conditions of this
Agreement shall not be disclosed by any party hereto without the prior written
consent of the other parties; provided, however, that Castle may disclose such
information as is required to comply with the requirements of their lenders and
to comply with applicable securities laws. Subject at all times to the limit in
the immediately preceding sentence, no party hereto shall issue any press
release or make any other public statement, in each case relating to or
connected with or arising out of this Agreement or the matters contained herein,
without first providing a copy of the text of such release to the other party
hereto and giving such other party an opportunity to comment thereon.
18.11 CONSENT TO JURISDICTION. Any judicial proceeding brought against
any of the parties to this Agreement on any dispute arising out of this
Agreement or any matter related hereto shall be brought in any federal or state
court located in ▇▇▇▇▇▇ County, Texas, and, by execution and delivery of this
Agreement, each of the parties to this Agreement accepts for itself the
non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement.
18.12 SEVERABILITY. If any provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other provisions of this Agreement shall nevertheless remain in full force and
effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled.
18.13 ENFORCEMENT. The parties hereto agree that the remedy at law for
any breach of this Agreement is inadequate and that should any dispute arise
concerning any matter hereunder following the Closing and only if the Closing
occurs, this Agreement shall be enforceable in a court of equity
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by an injunction or a decree of specific performance. Such remedies shall,
however, be cumulative and nonexclusive, and shall be in addition to any other
remedies which the parties hereto may have.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed on its behalf as of the date first above written.
CASTLE DENTAL CENTERS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇, Vice President and Chief Financial
Officer
CDC OF CALIFORNIA, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇, Vice President and Chief Financial
Officer
CASTLE DENTAL CENTERS OF CALIFORNIA, L.L.C.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇, Vice President and Chief Financial
Officer
DENTAL CONSULTING SERVICES, LLC
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, D.D.S.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, D.D.S., a Manager
CASTLE WEST HOLDINGS, LLC
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, D.D.S.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, D.D.S., a Manager
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DCS MEMBERS
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, D. D.S.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, D.D.S., Individually
S. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.M.D.
S. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.M.D., Individually
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D. D.S.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.D.S., Individually
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, D. D.S.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, D.D.S., Individually
DENTAL ADVISORY GROUP, LLC
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, Managing Member
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HOLDINGS MEMBERS
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, D. D.S.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, D.D.S., Individually
S. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.M.D.
S. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.M.D., Individually
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D. D.S.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.D.S., Individually
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, D. D.S.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, D.D.S., Individually
DENTAL ADVISORY GROUP, LLC
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, Managing Member
▇▇▇▇▇ ▇'▇▇▇▇▇▇▇
▇▇▇▇▇ ▇'▇▇▇▇▇▇▇, Individually
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CORPORATE B MEMBERS
JDS-B CORPORATION
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, D.D.S.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, D.D.S., President
SAS-B CORPORATION
/s/ S. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.M.D.
S. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.M.D., President
MART-B CORPORATION
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.D.S.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.D.S., President
ES-B CORPORATION
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, D.D.S.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, D.D.S., President
DAG-B CORPORATION
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, President
-▇▇-
▇▇▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇
▇▇▇-▇ CORPORATION
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, D.D.S.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, D.D.S., President
SAS-C CORPORATION
/s/ S. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.M.D
S. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.M.D., President
MART-C CORPORATION
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.D.S.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.D.S., President
EL-S-C CORPORATION
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, D.D.S.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, D.D.S., President
DAG-C CORPORATION
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, President
JUL-C CORPORATION
By: /s/ ▇▇▇▇▇ ▇'▇▇▇▇▇▇▇
▇▇▇▇▇ ▇'▇▇▇▇▇▇▇, President
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